Volkswagen, Mercedes seek EV deals in Canada

The government of Canadian Prime Minister Justin Trudeau is trying to strike a supply chain deal with major German automakers in the face of stiff competition from the U.S. for electric vehicle production.

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Updated on:
December 1, 2022 at 08:55 am

Europe’s two largest automakers, Volkswagen AG and Mercedes-Benz, are expected to win deals to help Canada ramp up electric vehicle manufacturing.

Industry Minister Francois-Philippe Champagne began a week-long tour of Belgium and Germany, where he will attend meetings of Volkswagen AG’s management and the Mercedes-Benz group’s board of directors, among other meetings.

In August, the government signed a memorandum of understanding with the two companies during German Chancellor Olaf Scholz’s visit to Canada. Champagne said in an interview that this week’s trip was to “take it to the next level.”

The Volkswagen MoU focuses on deepening cooperation in battery manufacturing, materials and key minerals. The German company has pledged to open a Canadian office for its battery company PowerCo. The wording in the Mercedes agreement regarding cooperation in the electric vehicle and battery supply chain is less specific.

Canadian business groups have been sounding the alarm over the massive tax credits included in the U.S. Inflation Reduction Act to encourage electric vehicle production and have warned that Canada risks losing investment to its southern neighbor. In addition to consumer incentives, U.S. law has a manufacturing credit that subsidizes the production of battery cells and packs. UBS analysts said it “has the potential to make the U.S. a global center for EV batteries.”

Champagne said he has been reassuring companies that Canada is serious about leveling the playing field, as it promised in its budget update in early November. “Canada intends to be competitive in terms of production, and I think manufacturers are well aware of that,” he said.

The minister said Canada had until recently been on the radar of German automakers, but now the two sides are working to develop a long-term relationship that will take advantage of Canada’s abundance of vital mineral resources such as lithium, graphite, cobalt and nickel – all of which are essential for electric vehicles Manufacturing is critical.

“I don’t think they would have invited the Minister of Industry of Canada to their board meeting if they weren’t serious,” Champagne said, adding that he believed a deal could be done “in the coming months.”

First published date: December 1, 2022 at 08:55 AM CST

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