Northvolt will establish a lithium-ion battery gigafactory in the Canadian region of Quebec, as it utilises generous incentives to build its first production capacity outside Europe.

The Swedish battery start-up said on September 28 that it expects to invest $5bn in the facility, which will employ up to 3000 people once the first phase of operations begin in 2026. The planned investment is the largest ever recorded in Quebec’s history.

The factory, located just outside Montreal, has a target cell manufacturing capacity of 60 gigawatt hours (GWh) and will include cathode active material production and recycling. Northvolt has so far received $55bn-worth of orders from customers including BMW, Scania, Volvo Cars and Volkswagen Group.

The Canadian government has committed to match the generous incentives made available to companies in the US as a means to lure investment. The Financial Times reported that Canada’s government and the local Quebec administration will each offer $1bn to the Swedish company.

The incentive package offered by Canada to Volkswagen-owned battery company PowerCo for its new facility in Ontario amounted to $10.6bn, which was the largest of its kind on record, according to Incentives Flow, an fDi Intelligence database. The US has offered billions of dollars-worth of incentives to lure battery makers to set up gigafactories across the country.

The 170-hectare site for Northvolt’s gigafactory was chosen in part due to Quebec’s guarantee to provide 100% renewable hydroelectricity.

“With its unique access to renewable power and raw materials, we see this as the ideal base of operations for Northvolt’s first gigafactory outside Europe,” said Paulo Cerruti, Northvolt’s co-founder, in a statement.

Before Northvolt’s announcement, Canada was among the top destination countries for FDI into the the battery supply chain. Since 2021, almost $18bn had been pledged to battery supply chain projects in Canada, ranking it fourth behind the US ($65.9bn), Indonesia ($30.9bn) and Morocco ($26.2bn), according to fDi Markets, a greenfield investment monitor.