Volkswagen and Mercedes signed agreements with the Canadian government to acquire raw materials for EV battery manufacturing. Their facilities at US manufacturing plants will be availing the materials from Canada. This could push the automakers to qualify for US EV tax credit, as the recently signed bill was revised.
Earlier, President Biden officially signed the Inflation Reduction Act into law after months of back and forth among Congress. While the dust is still settling on this bill that includes revamped federal tax credits for EV purchases for another decade, there remains a lot of confusion on what vehicles will or will not qualify. Other than being assembled in North America, the new terms of the federal tax credit require a majority of battery components to come from North America, as well as a certain percentage of raw battery materials, come from the US or its free trade partners.
So, a list of qualifying EVs that was previously in the hundreds has now been dwindled down to dozens… at least for now. There will be plenty more to join the list as American automakers and foreign companies with US facilities pivot their production practices to qualify for credits. Both German automakers with US footprints are already making moves with our neighbors to the north, as Volkswagen Group and Mercedes-Benz Group have each signed supply agreements with the nation of Canada for materials vital to EV battery manufacturing on US soil.
As reported by Automotive News Europe, German Chancellor Olaf Scholz and Canadian Prime Minister Justin Trudeau were in attendance Tuesday when both automakers signed memorandums of understanding with Canada to secure access to raw materials vital to battery manufacturing, including nickel, cobalt, and lithium.
Volkswagen Group states that its agreement with Canada is designed to shorten its supply chains to its current facilities in the US in order to avoid certain tariffs and tax regulations. A spokesperson for the German automaker said Biden’s latest bill played a key part in the steadfast supply agreement, and its dedicated battery business PowerCo will begin ramping up manufacturing in the US with its new “reliable and sustainable supply chains.”
Volkswagen is already planning to erect six battery manufacturing facilities in Europe alone and has long been considering a new battery cell plant in the US near its Chattanooga manufacturing facility where the ID.4 is now being built. The company’s previous plan was to source cells from SK Innovation and its massive plant being built in Georgia.