Mercedes-Benz and Volkswagen sign EV battery supply deal with Canada

Volkswagen Group and Mercedes-Benz Group have sealed agreements with Canada to secure access to raw materials such as nickel, cobalt and lithium for battery production.

The separate memorandums of understanding were signed Tuesday in Toronto, with German Chancellor Olaf Scholz and Canadian Prime Minister Justin Trudeau in attendance.

Ottawa says the agreements will “help secure Canada’s position as a leading centre of excellence for the manufacturing of electric vehicles and batteries.”

The Volkswagen agreement focuses on deepening co-operation on sustainable battery manufacturing, cathode active material production and critical mineral supply.

The Mercedes-Benz agreement focuses on enhancing collaboration with Canadian companies along the electric vehicle and battery supply chains and supporting the development of a sustainable critical mineral supply chain in Canada.

Germany and Canada plan to work together in “areas such as critical raw materials,” Scholz said during a news conference with Trudeau on Monday in Montreal.

“I am very happy that among the many, many declarations which are being signed during our visit, there are also those planned by Volkswagen and Mercedes, for example, in which a closer cooperation in this area will be sealed,” Scholz said.

VW’s agreement is designed to shorten supply chains for its facilities in the United States and avoid difficulties linked to tariffs and tax regulations, said one of the people. The move has partly been prompted by new rules that U.S. President Joe Biden signed into law last week, a source said.

A VW spokesperson said the automaker and its dedicated unit for its battery business, called PowerCo, are working on ramping up their battery activities, “especially reliable and sustainable supply chains.”

“This holds true for the very promising North American market as well,” the spokesperson said by email. A spokesperson for Mercedes declined to comment.

“Working hand in hand with governments around the world is an absolute prerequisite to meet our climate goals and I want to thank the Canadian government for their support,” VW CEO Herbert Diess said in a statement after the signing. “The supply of battery raw materials and the production of precursor and cathode materials with a low carbon footprint will allow for a fast and sustainable ramp- up of battery capacity — a key lever for our growth strategy in North America.“

The Biden administration’s Inflation Reduction Act allows consumers to continue getting as much as US$7,500 in tax credits for electric vehicles if manufacturers meet new content requirements. Minerals must be extracted from or processed in countries the United States has a free trade agreement with, and a large percentage of battery components need to be manufactured or assembled in North America.

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