Volkswagen Group is moving quickly to comply with new tariffs and regulations in the U.S. for battery supply. The German company has signed a deal with Canada to secure access to raw materials like nickel, cobalt and lithium. These are all things needed for vehicle and battery production.
The move is meant to shorten supply chains for its U.S. facilities as well as avoid issues with tariffs and tax regulations. On top of all that, it’s also a way the company can comply with new $7,500 EV tax credit rules President Biden signed into law. The new rules place tougher restrictions on where materials and vehicle manufacturing can be done. The majority of the components for the battery need to be manufactured or assembled in North America.
Bloomberg reports German Chancellor Olaf Scholz and Canadian Prime Minister Justin Trudeau will be in attendance when the memorandums are signed in Toronto on Tuesday.
Automakers including VW, Mercedes and Stellantis NV have embarked on ambitious plans to make batteries. VW is planning six facilities in Europe alone, while Mercedes has joined Stellantis in a 7 billion-euro ($7 billion) battery venture and is pursuing a total of eight facilities globally.
VW is also considering setting up an in-house battery cell manufacturing operation in North America, Johan De Nysschen, chief operating officer of Volkswagen of America, said in June.
The goal, according to De Nysschen, is to ease a possible battery shortage from suppliers with its own supply. However, nothing is set in stone quite yet. The company’s board is still mulling over the decision.
As for why VAG picked Canada, Scholz said Canada “has similar rich natural resources as Russia – with the difference that it is a reliable democracy.”
Tough, but fair words from the German Chancellor.