Ottawa’s $13.2 billion is an “investment,” says Volkswagen Canada CEO

Pierre Boutin, CEO of Volkswagen Group Canada, couldn’t say much about the auto giant’s hunt for a North American battery factory for electric vehicles when he spoke to the Star in January. He confirmed that Canada was on the list, but that the negotiations were well above his pay grade.

In fact, Volkswagen was exploring the details of what the winning bid would be at the time Volkswagen’s first EV battery factory outside Europe – are $7 billion, St. Thomas, Ont., facility announced in May. It will be run by PowerCo SE, a company set up by Volkswagen to run its entire battery business. Both Queen’s Park and Ottawa have pledged $14 billion in government support for the new plant, a staggering sum that some critics say will fall short of its promises.

They may have good reasons to be skeptical. The subsidies are significant. While electric cars are one of the fastest growing vehicle segments worldwide, they are not yet legacy investments. A Ford or GM assembly plant in the 1960s represented an abundance of good jobs for future generations. The same has yet to be seen for electric vehicles, although investment is pouring in quickly. This week, auto giant Stellantis and Ottawa have a loaded EV battery factory in Windsor with up to $16 billion in grants.

Still, Volkswagen is confident the company’s St. Thomas EV battery plant won’t be a fad.

“It’s a really exciting time for us to consider Canada — to see these big investments coming back from the company,” says Boutin.

Boutin spoke to the Star about the deal from the sidelines of Toronto’s recent Collision technology conference:

Why Canada?

Why Canada? Many factors. First of all, the North American context is extremely important for the further development of our company. We are very strong in China. We are very strong in Europe and we need a third leg — which is basically North America. Canada has one of the cleanest mining industries in the world. They work hand in hand with communities. In many of these cases we are talking about indigenous communities.

The human rights factor is extremely important to us because we’re not just about building electric cars — we’re also looking at all social, economic and environmental sustainability factors. If we have to supply electric vehicles to reduce CO2 emissions, the last thing we want to do is create more through our production process. And the third element is that there’s a lot of automotive knowledge in Southern Ontario at every level: energy, power, systems.

Many car towns in Ontario have been burned to the ground by car companies in the past with layoffs and downsizing. Has there been one skepticism of St. Thomas about your plant?

I will praise them – they are extremely dynamic. They want their community to prosper in the future. They have been great partners to work with. They really care about making St. Thomas and Southern Ontario a different place in the future. But when I talk about sustainability – on the social side – the transformation of our company to electric vehicles meant that a lot of people were really afraid of losing their jobs.

We have guaranteed employment until 2030. So we’re working with the unions to make sure we can keep people, we can offer them new jobs in new factories – or the same factory. We have undergone extensive retraining. It is still an assembly line in many cases. But it’s different. There are many safety standards that we don’t need to have in a factory with internal combustion engines. If you invest in people, you get much more extra sustainability for your company.

If you look at St. Thomas and what we’re going to do — it’s not for two years. It’s not for five years. We are talking about generations after generations. So we are going for the long term. We must do what is right for the long term.

What is the rental plan for the factory? Do you have a game plan in the works?

There is always a game plan. When we invested in Chattanooga to launch the ID.4 EV model, we had to recruit literally thousands of people – in times of COVID – when the unemployment rate was less than five percent. It is a challenge for all Western countries to find talent, to find people who want to contribute to the economy, who are interested in this kind of job.

And we know it’s a challenge. But like everything else, we’re executing a plan and we’re going to increase employment in our factory. Because it’s important to us, it’s important to the community. And we are not afraid of the challenge.

There has been much criticism of the amount Volkswagen received for this deal. I’ve seen claims that it’s a classic case of corporate welfare. What do you think of this review?

First of all, we should call this an investment. And from what I understand, the government also viewed it as an investment – ​​for the future of the economy. We had over 200 criteria to make this decision. Yes, the financial factors were important, but they were not the only ones. Many jurisdictions in North America have contacted us. We’ve had a lot of conversations and evaluations — because we could have made this investment in many other places.

Like where?

I won’t bring that up for obvious reasons. But many of these jurisdictions also competed for such an investment. Just as we ask ourselves whether something is a good investment for future generations, so does the government. Factories like this don’t go in and out in two years. We invest this kind of money because it will be absorbed by generations to come.

Everywhere we’ve been, we’ve positively impacted the production of many things. Let’s not forget one thing: we are all committed to reducing the carbon impact of personal mobility, and battery electric vehicles are the technology today. We want to make sure we contribute to the development of more battery electric vehicles in Canada for Canadian consumers.

PowerCo’s purpose is research and development, raw material transformation, production and recycling. We want to serve the needs of all our brands worldwide through Power Co, but Power Co is also considering selling some of these batteries to other manufacturers. It is therefore not an exclusive element for Volkswagen. We want to be a key leader in the transformation of sustainable mobility to reduce our reliance on carbon emissions, and we believe these investments are likely to help achieve this – not just for North America, but certainly for Canada.

There are many interesting developments in batteries right now – using sodium ion batteries is one. The completion of this new factory will take years. What happens if other technologies take off by the time it’s ready?

It’s highly customizable. Right now, even with the first-generation batteries, we’re making some substantial progress. I’ll give you an example. I’ll be on stage for the next few minutes with the president of Xanadu, a Canadian quantum computing company. They help us find better, faster ways to develop batteries. Another important factor for us, given Canada, was the development in the Kitchener-Waterloo area.

In our discussions to invest in Canada, the technology, research and development centers and the strength of post-secondary institutions were a key factor because we want to work with all of these people. If we didn’t come to Canada, we wouldn’t be open to these opportunities because we wouldn’t be involved in these communities. This is how we arrive at net-zero, sustainable mobility. No one is going to do it alone. We can bring a lot, but we can also learn a lot from the different players.

Volkswagen’s deal with Canada links the subsidies it receives with those it is given US. companies under Inflation Reduction Act. If those subsidies fall, those from Volkswagen will also disappear. What happens to the factory if they fall?

I am not aware of all the intricacies of the contracts. I don’t want to say anything about this except that when we make decisions there are always risks and there are always opportunities. We make these decisions to the best of our knowledge and understanding.

What will this factory mean for the average Canadian Volkswagen buyer? Are they going to look cheaper EV prices because batteries are made here?

If more batteries and other elements are produced in Canada, it will certainly help make them more affordable. Today, depending on the size of a zero-emission vehicle, the cost of the battery is between 30 and 45 percent of the total. And we are a global company. Many parts come from Europe, in euros, and the United States, in US dollars. Looking at our currency against these currencies, over the years, it’s very challenging at times — and that puts pressure on the price.

The fact that we are going to invest much more in Canada itself reduces the risk. We also strive to continuously reduce costs through the technical advancements we have developed over the past few days as we aim to bring the masses to market. That means we need to make electric vehicles more accessible. In Europe, we have a project called the ID.2 for Volkswagen that focuses on exactly this: finding a way to bring in an entry-level model at a much lower price.

That is our ambition. Because if we want to have 100 percent net-zero vehicles in Canada by 2035, this has to happen.

This interview has been edited for length and clarity.

Brennan Doherty is a former staff reporter for Star Calgary and Star Toronto’s 24-hour radio room. He is now a freelance worker.

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