Following the news that the Canadian Federal Government and Volkswagen have agreed to invest more than $14.8bn for the construction of a battery gigafactory in Ontario;

Lucy Tripathi, Automotive Senior Analyst at GlobalData, offers her view:

“Volkswagen is the second largest automaker in the world and the battery cell business is one of its new auto strategies, which will help the company in becoming a leader in low-carbon or zero-carbon emission mobility. The goal of Volkswagen is to have 80% of its vehicles to be electric by 2030.

“Previously, the company formed a joint venture with Umicore in December 2021, to gain access to Umicore’s battery technology, which was the company’s major step in achieving its goal. And the current investment in the Canadian plant, which is being built with its battery company Power Co, SE, is the next logical step towards the vertical integration of its supply chain. These strategic investments will help Volkswagen further strengthen its battery production capabilities and cost management.

“The sudden rise in acceptance of electrified vehicles, including battery electric vehicles (BEVs) and hybrid electric vehicles (HEVs), across the globe in the post-COVID-19 pandemic period, has been compelling major automakers to align their future strategic plans with this trend.

“According to GlobalData estimates, 19.4 million units of electrified vehicles were sold in 2022 globally, recording an annual growth rate of 40.2%. The sales are estimated to increase to 43.8 million units by 2026, registering a compound annual growth rate (CAGR) of 26% over 2021-2026. The global batteries market saw sales of 94.9 million units in 2022 and is expected to witness sales of 119.9 million units by 2026, registering a CAGR of 7.4%. In 2021, Toyota Group and Volkswagen were the leading electrified vehicle manufacturer companies with a market share of 10.7% and 9.5%, respectively, in the global electrified vehicle market.

“Once fully operational, the gigafactory with an estimated annual production capacity of 90 Gwh will boost the company’s future plans. With its extensive technology, innovation, and industrial know-how, Volkswagen will not only retain its dominant position in the rapidly changing car market but also challenge the world leader Toyota Group.”