Honda Motor is actively exploring the possibility of constructing an electric vehicle (EV) manufacturing facility in Canada, a move that could include the in-house production of batteries. This development, potentially involving a 2 trillion yen ($14 billion) investment, positions Honda to significantly ramp up its competition with U.S. and European EV producers.
The Japanese automaker is currently considering several sites, with a strong possibility near an existing automobile factory in Ontario. Honda aims to finalize its decision by the end of 2024, eyeing the plant’s operational start as early as 2028.
This Canadian venture would mark Honda’s second EV production initiative in North America, complementing its plans to manufacture EVs and batteries in Ohio starting in 2026. Canada’s recent commitment to phase out gasoline and diesel passenger vehicles by 2035, coupled with its abundance of renewable energy resources, makes it an attractive location for EV production.
North America is a critical market for Honda, accounting for approximately 40% of its global sales. With the majority of its current fiscal year sales in the region being gasoline-powered, Honda is strategically pivoting towards EVs, targeting 40% of its North American sales to be electric by 2030, and 80% by 2035.
In a distinctive shift, Honda intends to independently manufacture batteries in Canada, differentiating from its U.S. strategy where it partners with South Korea’s LG Energy Solution. The company is also exploring new technologies, including solid-state batteries, potentially collaborating with various partners in Canada.
This development follows Honda’s decision last year to cancel its plan for low-priced EVs with General Motors, indicating a long-term vision to increase its self-produced EVs. Although EV sales in the U.S. have seen a recent slowdown, Honda is proceeding with its plan, anticipating medium to long-term growth in EV demand.
The Biden administration’s goal for EVs to represent half of all new vehicle sales by 2030, along with several states banning gasoline vehicle sales by 2035, further underscores the strategic nature of Honda’s investment. The U.S. government’s tax incentives for EVs assembled in North America, with batteries sourced from approved regions, provide additional impetus for Honda’s proposed Canadian plant. By procuring key battery materials like lithium locally, Honda can enhance the eligibility of its Canadian-made EVs for U.S. subsidies, aligning with both market trends and environmental objectives.
