Canadian Parliament Buildings in Ottawa / Getty Images

Volkswagen and Mercedes-Benz have signed agreements with the Canadian government for raw materials for production of electric vehicle batteries, in a bid to bolster their futures in North American EV manufacturing and sales.

The separate memorandums of understanding were signed Tuesday in Toronto between Volkswagen CEO Herbert Diess and Canada’s Minister of Innovation, Science, and Industry, François-Philippe Champagne. German Chancellor Olaf Scholz and Canadian Prime Minister Justin Trudeau were also in attendance.

“I welcome that Volkswagen and Canada have signed a Memorandum of Understanding on battery value creation today,” said Scholz. “This is excellent proof that the cooperation with our close friends and allies in Canada is further deepening also in the context of raw material security and may encourage other companies to follow.”

The deals will help the electric vehicles from both German automakers qualify for new US tax credits. The recently passed Inflation Reduction Act allows for up to US$7,500 in rebates for EVs, with the provisions that they must be assembled in North America, have a majority of battery components built on the continent, and have a percentage of raw battery materials come from the US or its free trade partners.

PowerCo, Volkswagen Group’s new division dedicated to EV batteries, will drive the planned co-operation in the fields of battery value creation, raw materials supply chains and cathode material production in North America. PowerCo will establish a liasion officer in the country to partner with the mining sector in a bid to secure a supply of materials such as lithium, nickel and cobalt, as well as cathode material production.

Volkswagen already builds the ID.4 electric car in Chattanooga, Tennessee. Mercedes has a battery plant in Tuscaloosa, Alabama, and will also build its EQS and EQE there.

On top of qualifying for EV incentives, the deals will also streamline supply chains and secure critical materials in a country that has a stable government and economy.

VW is planning six battery production facilities in Europe alone and one in North America, while Mercedes has joined Stellantis in a US$7 billion battery venture and is pursuing a total of eight facilities globally.

The Volkswagen agreement focuses on deepening co-operation on sustainable battery manufacturing, cathode active material production and critical mineral supply.

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