‘We have one, maybe two years to turn the tide.’

That was the quote heard round the world this week from Volkswagen chief financial and operating officer Arno Antlitz, as the world’s second-biggest automaker and fifth-biggest EV maker faces historic decisions. 

The company just dissolved a job protection agreement in Germany that had been in place for three decades and was supposed to last until 2029. It is considering closing plants in its home country for the first time ever, as the VW brand loses money. It’s cutting investments in EVs and keeping its German battery plant at half capacity.

The good news for Canada is that the gigafactory in St. Thomas, Ont., being built by Volkswagen Group-owned battery company PowerCo remains “fully” on schedule to open in 2027, PowerCo spokesperson Jeff Lewis said in a statement to The Logic this week, with plans to start pouring concrete this fall. 

Brendan Sweeney, managing director of the Trillium Network for Advanced Manufacturing at Western University, noted that the company was still hiring aggressively in the region this summer. 

“I tend to think about what they’re doing in Europe as distinct from what they’re doing in North America,” said Sweeney. “This is stuff that’s going to really ramp up in like five years, not in one year. They’re going to give themselves enough wiggle room to address the market.” 

To be sure, the company faces an uphill battle in Europe, where manufacturers have had to contend with high energy prices, a flood of competition from Chinese manufacturers looking to break into the European market and waning market share in China itself. Renault CEO Luca de Meo warned that European automakers are budgeting for steep fines they’ll have to pay if the EV market doesn’t catch up to sales targets imposed by the continent’s policymakers. 

Still, VW’s North American prospects are far from uncomplicated. Since VW doesn’t have a production site in Canada,  battery cells from St. Thomas will need to be shipped elsewhere in North America—possibly to an EV assembly plant in the U.S. However, the country faces an election that could alter the incentives to make and sell electric vehicles there. And while labour relations are not as complex as in Germany—where employee representatives make up half the board—unions are gaining power and recently organized a VW plant in Tennessee. Many of VW’s partner companies, like Northvolt and Umicore, are struggling. 

Canada, which has tried consistently to win (and keep) VW plants in Canada since the 1970s, was finally able to close the St. Thomas deal with promises of access to green energy and critical minerals. 

But Greig Mordue, a professor at McMaster University who previously worked in corporate planning at Toyota, says cheap electricity and subsidies are likely to play a bigger role in Canada’s deal with VW than hydropower and largely undeveloped mineral deposits. 

Mordue notes a silver lining to any delays that the EV sector faces: VW’s production subsidies will be phased out between 2030 and 2032 or with the ending of the Biden administration’s Inflation Reduction Act in the U.S., so batteries produced after that will be cheaper for taxpayers. 

“We paid an awful lot, and it’s really relatively early in the process,“ he said. “These are the hiccups that happen.” 

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