Subsidies and raw materials draw Volkswagen to Canada
Canada has set up a multi-billion-dollar fund to support green technologies, and its goal was to attract new companies that produce electric cars, as these vehicles are experiencing a revolution. In addition to Volkswagen, Stellantis NV and LG Energy Solutions have chosen Canada as a location for further expansion. That's because the Inflation Reduction Act mandates that 50% of battery components be made in North America, so vehicles can get up to $7,500 in tax credits. In addition, Canada is home to many deposits of raw materials needed for battery production, such as lithium, nickel and co-alloys. To receive the subsidy, batteries will have to be manufactured with a minimum proportion of critical minerals mined or processed in the United States or a US Free Trade Agreement country, or from materials recycled in North America.
Big plans for the future
Although details of the investment and size of the plant have not yet been disclosed, Volkswagen's plan is to get the plant's capacity to the 20 gigawatt-hour mark. Building the plant is part of a long-term strategy to create regional supply chains in Europe, North America and China in order to minimize costs. The company plans to invest €180 billion to support electrification, of which €15 billion will be spent on batteries and raw materials. It also plans to increase its share of the electric vehicle market and wants to offer an affordable electric car priced at €25,000 by 2025. CEO Arno Antlitz said Volkswagen could reach 20% of its sales in electromobility by then, and is already investing two-thirds of its budget in it.
Share value development
The company's share value has remained relatively stable over the past five years. However, looking at the development of the value over the past year, we can see a 15 percent decline * During Wednesday's trading day, the price was at USD 128 per share. Riding the wave of a massive boom in the production of automotive energy parts, subsidies from the US and Canada, and plant expansion around the world could significantly boost the value in the future.[1]
Volkswagen's share performance over the past five years (Source: Google)
Olivia Lacenova, head analyst at Wonderinterest Trading Ltd.
*Past performance is no guarantee of future results.
[1] Forward-looking statements are based on assumptions and current expectations, which may be inaccurate, or the current economic environment, which may change. Such statements are not guarantees of future results. They involve risks and other uncertainties that are difficult to predict. Results may differ materially from those expressed or implied by any forward-looking statements.
