The U.S. Inflation Reduction Act (IRA) has accelerated Swedish battery manufacturer Northvolt’s decision to expand into North America, with the company announcing plans to build a $5.2 billion lithium-ion battery Gigafactory in Quebec, Canada. The facility, Northvolt’s first outside Europe, will have an annual production capacity of 60 GWh and is expected to begin operations in 2026.

Northvolt co-founder Paolo Cerutti acknowledged that the IRA “definitely played a role to accelerate our decision to expand into North America”. The $300 billion climate and tax deal provide green subsidies for businesses, including tax credits for electric vehicles containing at least 50% North American-made components. Canada has also offered Northvolt financial support in the form of loans.

Cerutti stated that “Canada understood very well, that if they wanted to keep a place in this race and batteries will play an instrumental cornerstone role in this energy transition economy, they needed to match or to set into place a mechanism that [is] close or similar to the Inflation Reduction Act”. The project will be funded by Northvolt’s $3.2 billion investment and $1 billion each from the Quebec and Canadian governments.

Earlier this year, Volkswagen also announced plans to open its first battery cell plant outside Europe in Canada, allowing its vehicles to qualify for Canadian and U.S. subsidies. Northvolt was evaluating expansion options between North America and Germany, with German authorities pledging state support in May to push ahead with another factory in the country.

The IRA is attracting overseas battery manufacturers to the U.S., offering tax credits for domestic production of battery components and critical minerals. While the EU is not responding to the IRA with investment “to the level that it needs to be”, Canada has agreed to subsidies that could reach C$13 billion over a decade to secure a Volkswagen EV plan.