Sweden-based Northvolt, an electric vehicle battery manufacturer co-founded by former Tesla employees is planning to build its first plant outside of Europe in Quebec as part of an investment representing 7 billion Canadian dollars, or US$5 billion.

The Canadian federal and provincial governments are offering up to CA$4.6 billion in subsidies for the plant, which is expected to generate economic benefits equal to the value of production incentives within five to nine years, according to a statement from Quebec.

Northvolt's plant slated for a vacant plot of riverside land about 45 minutes southeast of Montreal represents the largest private investment in Quebec's history, Northvolt said in a statement. Northvolt picked Quebec for the plant, called Northvolt Six, after a thorough review of potential sites in North America. Quebec stood out because of its hydroelectricity, which guarantees production using 100% renewable energy, as well as the province's "unique access" to raw materials, according to the statement.

"In the seven years since Northvolt was founded, we have pursued a singular goal — to establish a new, sustainable model for battery manufacturing. Today, we are expanding our ambitions by bringing Northvolt to Canada," said Northvolt CEO and co-founder Peter Carlsson in the statement.

The project, previously reported in CoStar News in July, will be built on land measuring over 170 hectares, or 18 million square feet, in McMasterville, a town of about 6,000 residents, with part of the land being in nearby Saint Basile le Grand, a town of 17,000 people.

Some residents of the nearby areas have expressed fears that the Northvolt Six plant will increase traffic in the residential areas and overwhelm local roads and highways.

Construction on the first phase of the fully integrated lithium-ion battery plant will start by the end of this year with the first batteries being produced in 2026. The first phase, which also includes adjacent facilities for cathode active material production and battery recycling, is expected to create up to 3,000 jobs in the region.

At full capacity, Northvolt Six is expected to make enough batteries to power 1 million electric vehicles per year, according to the statement from Quebec. Some of Northvolt's customers include BMW, Fluence, Scania, Volvo Cars and Volkswagen Group. 

Paolo Cerruti, co-founder of Northvolt, will lead the project as CEO of Northvolt in North America, headquartered in Montreal.

"Northvolt Six's potential is enormous, not only to rapidly develop our ability to deliver sustainable batteries to the North American market, but also to accelerate Quebec's emergence as a key player in the global energy transition," Cerruti said in the statement.

The vacant land for the future Northvolt plant long housed a CIL explosives plant that had up to 600 employees in the 1980s. The CIL plant switched over to making components for air bags for motor vehicles but discontinued operations due to intense competition.

Quebec has been competing against incentives offered by the United States in wooing electric vehicle-related companies like Northvolt. The province has succeeded in luring a number of other electric vehicle battery component manufacturers to its industrial park in Becancour.

"Northvolt's decision to choose Quebec from more than 70 locations to launch its project is a testament to confidence in the electric vehicle ecosystem we are currently building in Quebec and across Canada, as well as in our skilled workers," François-Philippe Champagne, minister of innovation, science and industry for Canada, said in the statement. "It also says a lot about our country's competitiveness when it comes to attracting major investment."

Northvolt is receiving less incentives from Canadian governments than German automaker Volkswagen for its plan to build its first battery plant outside Europe in Canada. Volkswagon picked a site in St. Thomas, Ontario, about halfway between Toronto and Detroit, for its proposed battery factory that is expected to break ground next year.

Canadian government subsidies will amount up to CA$13 billion in that deal. The plant is expected to be the largest manufacturing plant in Canada when it opens in 2027.

Laurent Ferreira, president of the National Bank of Canada, recently criticized provincial government initiatives to subsidize electric vehicle plants in a speech at the Montreal Chamber of Commerce.

“My point on this is that when we give subsidies to foreign companies, they go straight into the pockets of foreign shareholders who are mainly non-Canadian. I have my doubts about this model in the longer term, in terms of wealth creation,” Ferreira said at the event last week.