FRANKFURT, Germany: In an effort to localize its electric vehicle production chain in the region, Volkswagen has announced that it will build its first battery cell plant outside Europe in Canada, enabling its automobiles to access both Canadian and US subsidies.

Six months after signing a memorandum of understanding with Ottawa to secure access to key raw materials for batteries, Volkswagen AG confirmed in December that it was looking for sites for a Canadian plant.

The plant will be based in the city of St. Thomas, Ontario.

Through a multi-billion-dollar green technology fund, Canada, which has considerable amounts of key minerals for mining, including lithium, nickel and cobalt, aims to attract companies involved in the entire EV supply chain.

European car makers, including VW, aim to benefit from a US climate law offering tax credits of up to $7,500 per auto, when 50 percent of EV battery components for vehicles to be made in North America.

Francois-Philippe Champagne, Canada's federal innovation minister, called VW's decision to build the battery plant in the country a "home run for Canada" and "the largest single investment in the auto sector in the history of Canada," as quoted by Reuters.

In addition to VW, in 2022 chemical company BASF said they would build a battery materials facility in Canada for the EV markets in the US and Mexico.

The decisions by various European companies highlight their keenness to expand their US presence and take advantage of funding from the Inflation Reduction Act launched by President Joe Biden in 2022.

Cars with batteries built at the planned Volkswagen plant will qualify for US subsidies, which are available to vehicles with batteries made with a minimum proportion of critical minerals extracted or processed in the US, or a country with a US free-trade agreement, or recycled in North America.