Volkswagen Group is stepping up efforts to localize production in key markets by expanding its manufacturing footprint in North America.

The automaker on Monday announced plans to build its first battery plant on the continent, to be located in Canada. The announcement comes just weeks after VW Group announced plans for a plant in South Carolina to build rugged electric vehicles for the newly established Scout brand.

“With the decisions for cell production in Canada and a Scout site in South Carolina we’re fast-forwarding the execution of our North American strategy,” Oliver Blume, VW Group's CEO, said in a statement.

VW Group also mentioned access to raw materials and clean energy as reasons for selecting Canada for the battery plant.

Battery cell development at Volkswagen Group plant in Salzgitter, Germany

Battery cell development at Volkswagen Group plant in Salzgitter, Germany

The Canadian plant, which will be operated by VW Group's PowerCo battery company, will be located in St. Thomas, Ontario, and is scheduled to start production in 2027. The plant will initially build battery cells featuring a common design that will be used in roughly 80% of the automaker's lineup. The automaker expects the common cell design to reduce battery costs by as much as 50% compared to current levels.

The Canadian plant will be PowerCo's first outside of Europe. The battery company last year announced plans for six battery plants in Europe alone, some of them operated in partnership with rival battery company Northvolt.

VW Group has more expansion plans for North America. The automaker on Monday also announced plans to upgrade its plants in Puebla and Silao, Mexico, to ready them for EV production and possibly EV component production in the second half of the decade. The automaker's in-house software division, Cariad, also established a U.S. hub with facilities in Seattle and Silicon Valley in early 2023.