Three pension funds already booked Northvolt losses
Ottawa is pressing Canada's pension funds to put more capital into domestic industry, including advanced manufacturing. The country's largest planned electric vehicle (EV) battery plant has now pushed its start date back two years.
PowerCo Canada Inc., Volkswagen AG's battery subsidiary, said Sept. 24 that its St. Thomas, Ont., plant will begin operating in 2029 instead of 2027. The company cited evolving market demand, technological advancements and Volkswagen Group's long-term strategy.
The federal government's $25 billion Canada Strong Fund is a commercial co-investment vehicle targeting infrastructure, energy, critical minerals and advanced manufacturing alongside institutional capital.
Ottawa has also scrapped the 30% cap on pension fund investments in Canadian entities.
"What we really need to understand is this: Is Volkswagen legitimately deferring actual production, or are they deferring a decision on the ultimate utility and necessity of that plant?" said Greig Mordue, associate professor at McMaster University's Booth School of Engineering Practice and Technology in Hamilton.
Billions tied to output
Ottawa agreed in 2023 to provide up to $13.2 billion in production subsidies to Volkswagen over a decade. The Parliamentary Budget Officer later estimated the total federal commitment at about $16.3 billion.
Mordue said the delay could save taxpayers billions because many incentives were tied to production targets and were set to scale back in 2030 before disappearing by 2032. With output starting later and below planned levels, he said, those incentives, "that are measured in the billions of dollars, will not occur."
A pattern of paused projects
Honda postponed its $15 billion Ontario EV and battery project by about two years in May 2025, citing a slowdown in the EV market. Ottawa had planned about $2.5 billion in tax credits for the project, with Ontario committing up to $2.5 billion.
In Quebec, the province ended support for Northvolt's planned battery plant in September 2025 after losing $270 million on its investment in the Swedish parent.
OMERS booked a loss on its $325 million investment, the Caisse de dépôt et placement du Québec wrote its $150 million stake down to zero, and IMCO marked down its $400 million investment.
Stellantis's idled Brampton Assembly Plant faces possible closure and sale, which Unifor said this month threatens the wages, pensions and benefits of its members.
Capacity ahead of demand
Mordue said the St. Thomas delay should not surprise anyone following Volkswagen or the North American EV market, adding that a lot can happen in three years and the plant's future is far from resolved.
Earlier this month, Volkswagen said it was looking to cut up to 100,000 jobs worldwide in response to competitive pressures, including weaker sales in China, where Chinese automakers have taken market share.
He said the fact that St. Thomas was spared while Volkswagen right-sizes in Germany is positive.
"Frankly, it could've gone either way," he said.
PowerCo has said the plant could produce up to one million batteries a year. Conrad Layson, a senior analyst at AutoForecast Solutions LLC, said demand and that scale are "well out of line with the vehicles that Volkswagen is looking to produce in North America."
In April, Volkswagen stopped producing its electric ID.4 in Tennessee, one of the main vehicles St. Thomas was meant to support.
Layson said conditions such as the elimination of US EV incentives mean full capacity is likely years away.
Higher gas prices from the war in Iran have renewed buyer interest, and EV sales now account for 5% to 6% of all car sales, below the 8% recorded before 2024.
Layson expects EVs to gain prominence over time, though "the degree of prominence is the open question."
The cost case for Canadian cells
Layson called the delay puzzling since Canadian cells would cost less than Chinese imports despite US tariffs, though still "hideously expensive."
"However, the cost of importing a Chinese cell versus a Canadian cell is different, and the Canadian cell is lower," he said.
He added the delay spares Volkswagen billions of dollars on a facility that will not approach capacity for years.
Shovels still in the ground
Construction continues under general contractor EllisDon, with the on-site workforce expected to peak at 1,300. Since groundbreaking in 2025, work has moved into core infrastructure and structural phases.
PowerCo Canada chief procurement officer Joel Karlsberg said the factory "remains a cornerstone" of Volkswagen's North American strategy.
"This is about getting the pacing right – not stepping back – to protect our long-term investment, support regional jobs and position Canada, Ontario and St. Thomas to benefit in a dynamic and evolving market," he said.
St. Thomas Mayor Joe Preston called the announcement positive news. "I have a rough time trying to find a cloud on a sunny day," he said, pointing to Canadian solutions in the plant's construction.
