Agreement with German automakers 'unprecedented' for Canada, says auto industry insider

Memorandums of understanding the federal government signed with two of Europe's largest automakers are unprecedented, according to the president of Canada's Automotive Parts Manufacturers' Association.

On Tuesday the federal government announced it reached agreements with Volkswagen and Mercedes-Benz that would help the German automakers secure access to the critical minerals needed for electric vehicle batteries.

Those critical minerals – such as lithium, nickel, cobalt and graphite – are primarily found in parts of northern Ontario and northern Quebec. 

"It is absolutely unprecedented," said Flavio Volpe, president of the Automotive Parts Manufacturers' Association. 

He said the agreements with both companies sends a signal to other car manufacturers that northern Ontario and northern Quebec are the places to access critical minerals if they want to qualify for new electric vehicle tax credits in the U.S.

To qualify for the new tax credits in the U.S. – which are worth up to $7,500 for electrical vehicle buyers – automakers must manufacture their vehicles in North America, and source most of their critical minerals and battery materials from countries that have a free-trade agreement with the U.S.

The Volkswagen agreement "focuses on deepening cooperation on sustainable battery manufacturing, cathode active material production and critical mineral supply, among others, and on setting up a Canadian office for PowerCo, Volkswagen's newly formed battery company," the federal government said in a press release.

The Mercedes-Benz agreement focuses on enhancing collaboration with Canadian companies along the electric vehicle and battery supply chains and supporting the development of a sustainable critical mineral supply chain in Canada.

"Canada is committed to building a strong and reliable automotive and battery supply chain here in North America to help the world meet global climate goals," Minister of Innovation, Science and Industry François-Philippe Champagne, said in a press release.

Volpe told CBC News the deals mean the government of Canada will act as a "concierge" and help both the automakers and mining companies build relationships and develop the resources for electric vehicle batteries.

"This government of course has shown an exemplary commitment to working with Indigenous partners and local communities," Volpe said.

"But sometimes having the federal government in the room and in support makes for a lot less mistakes in translation, a lot more goodwill and understanding."  

Volpe added the deals with both companies, and the move to build more electric vehicles, will expand the reach of Canada's automotive sector beyond southern Ontario, to communities in the north.