Volkswagen subsidiary delays opening of EV battery plant

A subsidiary of Volkswagen Group has delayed by two years the opening of its electric-vehicle battery plant in Ontario, in another setback to Canada’s hopes of creating an EV manufacturing sector.

PowerCo Canada said in a press release on Thursday the battery plant in St. Thomas, Ont., will begin operations in 2029 rather than the 2027 target set when the $7-billion project was announced in 2023. The company said at the time the project will be its largest battery plant and employ as many as 3,000 people.

“St. Thomas is now expected to begin operations in 2029 to accommodate next-generation battery technology, while retaining the flexibility to scale over time as market conditions evolve,” PowerCo said in a statement on Thursday, describing the project as a “demand-aligned.”

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PowerCo spokeswoman Tegan Versolatto said the company is taking a “phased approach” to ensure the plant is built to meet future market needs and advances in technology.

“The timeline reflects a disciplined approach to an evolving market, not a change in commitment,” Ms. Versolatto said in an e-mail Friday.

The delay underlines the headwinds faced by EV makers amid slowing demand in growth for zero-emissions cars after the U.S. government removed consumer purchase incentives.

The International Energy Agency estimates electric vehicles will account for almost one-third of global sales in 2026. But EVs were just 5.8 per cent of U.S. new cars sales in the second quarter, according to U.S. consultancy Cox Automotive. In Canada, zero-emissions cars accounted for almost 11 per cent of new sales in July, Statistics Canada says.

A handful of Canadian EV projects have been cancelled in the past two years, despite billions of dollars in taxpayer contributions federally and provincially.

Speaking to reporters at Queen’s Park, Ontario NDP Leader Marit Stiles on Friday said the delay was more evidence that the province’s EV strategy was in tatters, noting other auto companies that have pulled out of or delayed plans to build factories in the province.

The federal and Ontario governments have announced billions in incentives and subsidies in an effort to attract companies that will build an EV supply chain, from batteries to complete vehicles.

“I am going to remain optimistic that those jobs will be coming to the people of St. Thomas,” Ms. Stiles said. “We desperately need them. But I am very concerned.”

Ontario Premier Doug Ford said on Friday he is not worried by the delay.

Ottawa and the province agreed to provide $1.4-billion in funding to the project, but the money does not flow until certain benchmarks are reached.

“I know they said they’re going to delay it, but when you sign a $1.4-billion dollar agreement, a contract – that’s massive,” Mr. Ford said. “That says, ‘Okay, we’re in uncertain times around the world right now, but we have confidence in Ontario.’”

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The province’s Economic Development Minister Vic Fedeli said the two-year delay was actually good news, as PowerCo has signed a deal with a major contractor to go ahead with the massive plant.

“I think to me, the news yesterday was extremely exciting. I know there’s different takes on it, but for me, there are now shovels in the ground,” Mr. Fedeli told reporters Friday in Toronto. “The company has been hired, awarded a contract. There’s a $7-billion building and infrastructure being built there. To me, that’s nothing but good news.”

Mr. Fedeli called the news that Volkswagen intended to proceed with the plant a “massive relief,” noting it is one of three such battery sites it will have around the world, building not just for EVs but making other lithium-ion batteries for other uses as well.

He said provincial money given to the company– he did not say how much – along with spending by the local municipality in sewer and water pipes for the site would have been spent attracting other companies to the town’s industrial park. He said he expected other feeder companies to set up near the PowerCo project.

PowerCo mentioned the delayed start in the second-last paragraph of a press release announcing Canadian construction company EllisDon Corp. as the general contractor for the next phase of construction.

“Partnering with EllisDon allows us to keep construction moving while ensuring we retain the flexibility to scale the facility in line with market demand and long-term industry evolution,” said Joel Karlsberg, chief procurement officer of PowerCo Canada.

Much of the building’s structure is in place, with 60 EllisDon workers on site and a few hundred PowerCo employees working elsewhere. That’s according to St. Thomas Mayor Joe Preston, who said in an interview he is confident the battery plant will open in 2029 but would have preferred to see it open sooner.

“I drive by the plant every day and there’s about a billion dollars’ worth of construction that’s already occurred,” Mr. Preston said by phone. “It will carry on being the largest of Volkswagen’s battery facilities and located in St. Thomas, Ontario. We’re still pretty excited about it.”

Recent reversals in Canada’s EV projects include Honda’s indefinite suspension of a $15-billion Ontario project this year and Northvolt of Sweden’s battery plant near Montreal, which collapsed in bankruptcy in 2025.

Stellantis in February walked away from its NextStar EV battery joint venture in Windsor, Ont., leaving it to LG Energy Solution. The factory has pivoted to energy storage as growth in demand for EVs slowed.

Additionally, General Motors last year cancelled the BrightDrop electric delivery van and laid off 1,150 people in Ingersoll, Ont. Ford, meanwhile, abandoned plans to make EVs in Oakville, Ont., in 2024 and switched to pickups powered by fossil fuels.

With a report from Laura Stone