Employees work on the assembly line for a Volkswagen (VW) ID.4 electric car during the launch of its production at the German carmaker Volkswagen's site in Emden, northern Germany.DAVID HECKER/AFP/Getty Images
Industry Minister François-Philippe Champagne is talking as though it’s all but a sure thing that the Volkswagen Group is about to choose this country for a landmark commitment to electric-vehicle manufacturing, a week after appearing in front of hundreds of the company’s leaders at a corporate summit in Germany.
Read between the lines of Volkswagen’s recent communications, Mr. Champagne said in an interview, and there’s not much doubt: “Canada is the place for them when it comes to their first battery plant in North America.”
He is not far out on a limb, based on recent conversations with auto-sector insiders engaged in Canada’s efforts to build an EV supply chain. They see it as an unusually strong signal of interest for a company like Volkswagen to publicly announce that it’s working with Ottawa to identify possible factory sites, as it did during Mr. Champagne’s visit by bolstering a memorandum of understanding first inked last summer, and through its corporate social-media accounts.
It’s not a done deal just yet. The United States, aggressively trying to build its own EV industry as President Joe Biden’s administration rolls out hundreds of billions of dollars in clean-economy spending – and already home to a Volkswagen assembly plant in Tennessee – is likely to keep competing hard for the investment.
But with Mr. Champagne predicting Volkswagen will decide on a site within a matter of months, Canada seems tantalizingly close to a major breakthrough in its efforts to become an EV-making powerhouse – one in which it proves able not only to hold onto existing auto production as the electrification revolution takes hold, but to attract global giants with little or no history here.
To date, the flurry of EV-manufacturing announcements over the past couple of years has involved companies with long presences in Ontario’s industrial heartland – Ford Motor Co., General Motors, Stellantis – committing to stick around as they transition from making gasoline-fuelled vehicles.
Not since Honda and Toyota in the 1980s, however, has an automaker put down significant Canadian manufacturing roots.
Volkswagen, by some definitions the world’s largest automaker (and, if not, then second or third), would be an ideal one to make history that way.
Not only would this be Volkswagen’s initial battery factory on this continent; it would be its first outside Europe (where the first of several plants is scheduled to open in 2025). So choosing Canada would have major symbolic value – a potential validation of the sales pitch that Mr. Champagne is making to other manufacturers that might consider coming here as well.
The imperative, for him and his provincial counterparts, is now to make that pitch as airtight as possible.
As Mr. Champagne describes it, the case he laid out for Volkswagen executives at the summit in Germany involves five factors, adding up to a Canadian edge as a reliable strategic partner during unstable geopolitical times.
A couple of those factors – all the existing auto-making infrastructure on the Canadian side of the Detroit-Windsor corridor, and ready access to the U.S. market – are built in, though they’re presumably more useful in matching any U.S. bids than trumping them. (While Quebec is also vying for Volkswagen’s investment, Ontario is generally considered the likelier destination.)
Another seems to be a fairly sturdy advantage over competing U.S. jurisdictions, including those in the southeastern U.S. where most recent foreign auto investment has gone: a relative surplus of talent at a time when skilled-labour shortages are common.
Canada is not immune from those shortages in some places, with Windsor in particular already under some strain to meet the job requirements of its coming Stellantis-LG battery plant. But it’s less of an issue in other parts of southwestern Ontario, where there are bases of workers displaced from other manufacturing jobs, complemented by training programs and the country’s liberal immigration policies.
A fourth consideration being invoked by Mr. Champagne – Canada’s comparatively clean electricity supply – is undoubtedly helping with a company that wants energy-intensive battery manufacturing to align with sustainability targets. That’s an advantage where some reassurance may be needed, if the factory is to go in Ontario, since that province’s electricity emissions are forecast to rise in coming years (from increased natural-gas reliance) just as the U.S. pours huge sums into renewables.
But the factor where Canada might need to work hardest to press its case is its access to critical minerals such as lithium, cobalt and nickel.
Nothing is more fundamental to Mr. Champagne’s pitch than Canada’s purported ability to mine and refine those battery elements in a way that leads to a more complete, reliable and sustainable supply chain than other destinations can offer.
At the same time, it’s also the most uncertain aspect, with the federal government itself acknowledging that Canada currently takes too long to develop resource projects, as just last Friday it launched a critical-minerals strategy that promises to streamline and expedite regulatory processes.
So far, Mr. Champagne seems to be persuading Volkswagen that Ottawa is serious about speeding things up. And some risk in timelines for sourcing raw minerals domestically may not be a deal-breaker for a company planning a factory that it intends to be operational for decades – especially if the other selling points are compelling.
The Industry Minister could be helped, from this point, by one other competitive advantage that others around the sector mentioned: crosspartisan alignment in which his Liberals have been able to work hand in hand with Ontario’s Progressive Conservative government in courting EV makers.
The more that he brings his provincial colleagues in on the sales job, the more it may strike a contrast to political dysfunction south of the border, strengthening the argument for Canada’s stability.
In the meantime, Mr. Champagne may have to fight impulses to get ahead of himself, though they’re understandable.
By his account, when he met with other European automakers during his recent travels, Volkswagen’s enthusiasm was already sparking their interest.
“There’s kind of a sense that you don’t want to miss out,” Mr. Champagne said. “Everyone is now actively looking at Canada, and I think you’ll see interesting things over the next few months.
“This is just the beginning, as far as I’m concerned.”