ST. THOMAS – The federal government will provide Volkswagen with up to $13 billion in production subsidies for the just-unveiled electric-vehicle battery plant it plans to build in St. Thomas, nearly double the estimated $7-billion cost of construction.
ST. THOMAS – The federal government will provide Volkswagen with up to $13 billion in production subsidies for the electric-vehicle battery plant it plans to build in St. Thomas, nearly double the estimated $7-billion cost of construction.
Ottawa’s backing is by far the most generous subsidy the Canadian government has ever provided to an automaker for locating a factory here.
Officials with the German automaker joined Prime Minister Justin Trudeau and Premier Doug Ford here Friday morning to officially announce details of the manufacturing plant, which is expected to begin production in 2027 with up to 3,000 workers.
Trudeau addressed criticism over the size of the subsidy.
“Let’s be really clear about what’s happening here today,” the prime minister said. “Our neighbors to the south were willing to put up an awful lot of money” to locate VW there.
“Everyone wanted this.”
The job-creation boost is expected to stretch far beyond Southwestern Ontario.
The German auto giant’s landmark local plant should create tens of thousands of other jobs across Canada in every sector, including mining, said Francois-Philippe Champagne, the Liberal government’s minister of industry, science and innovation.
The federal government’s investments, Champagne noted, will pay off by 2030 through those kinds of economic spin-offs.
“This is a great investment for Canada because the economic impact will equal our investment in five years,” he said. “This is a good deal. We made the decision to invest in workers, invest in manufacturing.”
Trudeau agreed with Champagne on the subsidies paying off. “The future will be strong and bright for people in St. Thomas and across the country. This is the place to build the future together.”
The federal funding is meant to match the subsidy Volkswagen would have received through United States President Joe Biden’s Inflation Reduction Act, had it decided to build the factory in America instead. And it includes a provision that if the US stops offering the subsidies, Canada will stop as well.
Canada normally sticks with subsidizing investment costs. In previous deals with automakers, those grants have usually ranged from 10 to 20 per cent of projects’ capital budgets.
In this case, Canada will be offering subsidies during the factory’s early years of operation, tied to the number of vehicles produced. The US has more history with this type of subsidy, which it provides annually through tax credits.
The hope is that the factory will serve as an anchor that spurs investment in the mining and refining of battery metals, while also benefiting Canadian parts manufacturers.
The plant will be VW’s first North American EV plant. It will be located on a portion of 1,500 acres (600 ha) assembled by the City of St. Thomas.
Volkswagen reached out to the Ontario government about one year ago and St. Thomas, working with the London Economic Development Corp. (LEDC), made the pitch for the plant and assembled the parcel of land, a portion of which was sold to VW.
Volkswagen chose St. Thomas because of its proximity to mineral supplies found in northern Ontario, its workforce and the region’s track record in manufacturing, Kapil Lakhotia, chief executive of the London Economic Development Corp., said at the time of the announcement in March.
“This historic regional investment has brought our communities, post-secondary institutions, and newcomer talent together to ensure we have the workforce we need to fill thousands of jobs,” said Kapil Lakhotia, CEO of the LEDC. “The electrification of the auto industry is creating opportunity, innovation, spin-off and supply-chain jobs.”
It is believed the St. Thomas plant will supply three VW plants making electric vehicles, one in Tennessee, another under construction in South Carolina and an Audi plant that has not yet been announced.
St. Thomas assembled land in the city and in Central Elgin for major manufacturing in the last year. The Ontario government passed legislation allowing for a boundary change so all the land is in St. Thomas, streamlining local approvals.
The site in east St. Thomas is bounded by Highbury Avenue, Ron McNeil Line, Yarmouth Center Road, and the rail line just north of Talbot Street. Site clearing already has begun and buildings on the site will be demolished.
The batteries made in St. Thomas will be able to supply one million vehicles a year, said Frank Blome, the chief executive of PowerCo., VW’s battery-making subsidiary. As for the plant itself, it will be more more than 200 football fields in size.
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