Audi plant in Ontario 'a real possibility' with VW battery factory there, analysts say

Volkswagen Group’s choice of Ontario for a new battery cell manufacturing plant puts Canada in contention to land an additional auto assembly operation, as the German automaker’s luxury brand Audi weighs establishing a new North American site to build electric vehicles, auto analysts say.

A Canadian assembly plant to complement the planned battery site in St. Thomas, Ont., “is a real possibility,” said Conrad Layson, senior alternative-propulsion analyst at U.S.-based forecasting firm AutoForecast Solutions.

“It puts the Audi production line very close to the PowerCo facility … and there are benefits to that.”

Because battery cells do not travel well, minimizing the distance between battery and vehicle production cuts down on cell scrappage, Layson added.

“These things are electrochemical reactions, even in their lowest charge state during transport. It’s almost like transporting live animals. Some of them don’t make it.”

Volkswagen and its in-house battery unit PowerCo announced in March plans to build a cell plant in St. Thomas, located midway between Toronto and Windsor. March 13. Few details have been released, but more are expected at an event in the city planned for the coming weeks.

Audi, meantime, is mulling setting up a new EV assembly plant in North America.

No decision yet

Brand CEO Markus Duesmann said in February that the company was looking at a possible plant in the United States because of the incentives included in the Inflation Reduction Act.

The U.S. incentives extend to vehicles built north of the border, though Audi would not confirm whether Canada is also in contention for the investment.

Asked in an email whether the U.S. is the only North American jurisdiction in the running, or if Canada and Mexico are also being considered, Audi Canada spokesman Cort Nielsen said “there is no decision.” He would not elaborate on Audi’s plans for a possible EV plant, aside from saying the company has not decided whether to build a new assembly site.

With the new cell plant in St. Thomas locked in, Ontario’s prospects for the added Audi investment are better than they were before, but there is no guarantee, said Michael Robinet, executive director of automotive advisory services at S&P Global Mobility.

Labor supply in Ontario's favor

An Ontario Audi plant would benefit from its proximity to battery production in St. Thomas, he added, but it would also be isolated from Volkswagen and Audi suppliers clustered around existing assembly plants in the southern U.S. and Mexico.

Access to workers is one mark in Canada’s favor, said Robinet, who is based in Michigan. As illustrated by Volkswagen’s cell plant decision, there are “pockets of labor” remaining in Canada, while the right mix of talent and available land are becoming scarcer in the southern U.S., he said.

“We’re finding now that vehicle manufacturers are locating dependent upon where they can find people. … You could get all the incentive money you want from a government, but if you can’t find the people to build the products, what good is it?”

This blend of factors has helped Canada and the U.S. Midwest, reassert themselves as automakers make the transition to EVs, Robinet said.

For Audi’s prospective plant, the two resurgent regions could be in competition.

VW moving quickly

Sam Fiorani, vice-president of global at AFS, said siting the assembly plant within a “reasonable” distance of St. Thomas makes “a lot of sense.” He pointed to southern Ontario and neighboring Michigan as likely prospects if Audi moves ahead with the new site.

“Volkswagen seems to be moving very quickly to establish itself for electric vehicles in North America, and Canada seems to be at the right place at the right time for that movement.”

But if the automaker’s luxury brand is considering Canada for its assembly plant, the explorations remain at an early stage.   

In the lead up to Volkswagen’s St. Thomas battery plant announcement in March, the automaker registered more than two dozen staff as lobbyists in Ontario and Ottawa. No comparable listings for Audi staff or consultants exist in the provincial or federal registries.

Neither the Ontario nor federal governments would comment on whether they have met with Audi, though both welcomed the prospect of adding to their recent automotive investment tallies.

“We openly welcome discussions with future investors in all sectors, including automotive, as we work to build a strong Ontario,” said Vanessa De Matteis, spokeswoman for Vic Fedeli, Ontario minister of economic development, job creation and trade, in an email.

Laurie Bouchard, spokeswoman for François-Philippe Champagne, federal minister of innovation, science and economic development, said it was encouraging to see Canada attracting the attention of global automakers.

“We will continue to do everything to ensure that Canadians can benefit from the global transition to electric vehicles,” she said in an email.