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Canada signs agreement with Volkswagen and Mercedes-Benz to make EV batteries

Canada has inked a memorandum of understanding (MOU) with German carmakers Volkswagen and Mercedes-Benz to supply them with electric vehicle (EV) battery materials.

The Volkswagen agreement focuses on sustainable battery manufacturing, cathode active material production, and critical mineral supply. Volkswagen will also set up a new Canadian office for Power Co, its battery division.

The Mercedes-Benz agreement tightens collaboration between Canadian companies and carmakers to secure supply chains. Like Volkswagen, Mercedes-Benz is also looking to Canada to guarantee critical mineral supply for battery manufacturing, research and development, and seeking new investments in Canada.

Electric vehicles are seen as a significant component in the effort to address climate change. The ongoing uncertainties in gas prices are also increasing their appeal. According to IEA, more electric vehicles were sold in a single week in 2021 than in the entire year of 2012. And the total number of electric cars in use last year worldwide – 16.5  million – was triple the number on the road in 2018. The trend continued into this year; two million EVs were sold globally in the first quarter of 2022, a 75 per cent increase over the same period in 2021.

Nearly all of the world’s car makers are migrating their vehicle portfolios toward electric. Both Volkswagen and Mercedes-Benz have been making massive investments in electric vehicle technologies, and last month, Volkswagen announced a US$20 billion investment to produce cutting-edge electric batteries, an effort that could see US$20 billion in annual sales by 2030. Mercedes-Benz is also keen on securing its own battery supply chain. In addition to its Canadian agreement, the company expanded its supplier agreement with China’s CATL, the world’s largest battery maker, less than two weeks ago.

To fuel EVs’ growth, the world is eyeing Canada’s critical mineral deposits, and the Canadian federal government is looking to capitalize on the demand. In April, it allocated C$2 billion in its budget for refining the minerals needed to make EV batteries. Through the investment, Ottawa wants to back two new facilities that process minerals as well as a home-grown battery gigafactory.

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