PowerCo Canada Inc. awarded two major construction contracts for its massive electric vehicle (EV) battery plant in St. Thomas, Ont., on Thursday.
 

The step by PowerCo, the Canadian subsidiary of the Volkswagen Group-owned battery company PowerCo SE, comes two years after Canada offered unprecedented conditions to attract the plant, but today the landscape for electric vehicles has shifted dramatically.

PowerCo secured agreements for structural steel with Steelcon Group of Companies and vital foundation work with Magil Construction Canada Inc.
 

The gigafactory is the German automaker’s first EV battery plant in North America.
 

“Today’s announcement marks another pivotal moment for the St. Thomas gigafactory, propelling the project into its next phase,” said Frank Blome, chief executive of PowerCo SE, in a press release. “By leveraging innovative and skilled local expertise, St. Thomas will strengthen Canada’s position in the global EV battery manufacturing industry.”
 

This comes after a previous announcement from PowerCo in early August that it had launched a hiring campaign to fill positions for chemists, IT professionals, engineers and sustainability experts.
 

Danny Bianco, president at Steelcon Group of Companies, said the project will support economic growth and local employment, with Steelcon planning to deploy a team of more than 500 Canadian employees, including more than 30 workers from the surrounding London and Southwestern Ontario region.
 

Magil is slated to construct foundations for three buildings, encompassing a total floor area of 850,000 square feet at the St. Thomas site.
 

“The first concrete pour is anticipated in the coming weeks and will set the pace for the continued rapid progress to build the gigafactory,” the press release said.
 

Batteries produced at the St. Thomas facility will be supplied for the 
North American EV market.
 

However, it is still unclear how PowerCo and other companies will tackle substantial challenges swirling around the EV manufacturing space, from tariffs to dwindling demand from consumers.
 

Statistics Canada data show sales of zero-emission vehicles were down 35 per cent in June, compared with the same month last year.
 

“Everybody, including the manufacturers, were anticipating that the uptake on pure battery electric vehicles was going to be more rapid than it has turned out to be in reality,” said David Adams, president and chief executive of Global Automakers of Canada.
 

There are concerns surrounding the higher costs of these vehicles, as well as whether Canada has the necessary infrastructure for charging, while the unwinding of rebate programs by the federal government and British Columbia’s provincial government means fewer incentives for potential buyers as well.
 

“Everybody’s just hit the pause button on investment,” said Adams, adding that many sectors are waiting for the dust to settle and for some sort of trade agreement to form between Canada and the U.S.
 

“U
ncertainty is never good for investment of any sort, but particularly in the automotive sector, where any investment is usually hundreds of millions, if not billions of dollars.”
 

In the case of PowerCo’s EV battery plant, Adams noted the federal government has already made significant investments toward its completion. And in 2023, Ottawa agreed to give Volkswagen up to $13 billion in subsidies over the next decade, set to take effect when the battery plant begins production.
 

Adams added that despite the ongoing economic turmoil, auto companies are still anticipating the industry is moving toward electrification and pure battery electric vehicles in the long term.
 

“While we are closely monitoring the current trade situation, this project is a strategic, long-term commitment with strong fundamentals,” said PowerCo Canada’s chief procurement officer, Meredith Gibbons, in an email. “We are confident in its potential to drive economic growth and create skilled jobs here in Ontario.”
 

Gibbons said PowerCo remains on track for initial production to start in 2027, followed by a demand-based ramp up for commercial production.
 

“As we advance the gigafactory, we will ensure it continues to reflect the needs of Canadians and aligns with market demand,” she said.
 

However, Andreas Schotter, a professor of international business at Western University’s Ivey Business School who previously worked at Volkswagen, said he doesn’t think 2027 is a realistic deadline for PowerCo’s battery production to begin, noting the facility still needs its machines and time to train its workforce.
 

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Commenting before PowerCo’s announcement, Schotter said the industry headwinds may make it difficult for the battery plant to get built at all, given industry headwinds.
 

“I don’t think the U.S. policy at this point in time is favourable for more EV production and the consumers,” he said. “We haven’t seen the full effects of the tariff war in the U.S. yet.”
 

• Email: slouis@postmedia.com