Honda Motor Co. announced it will spend C$15 billion (US$11 billion) to build electric vehicles north of Toronto, with lawmakers in Canada promising significant financial aid though a new EV supply chain tax credit in the amount of $2.5 Billion.
The investment is being announced Thursday morning in Alliston, Ontario, by Honda officials and government leaders including Prime Minister Justin Trudeau and Ontario Premier Doug Ford. Bloomberg News first reported on April 21 that Honda and the Canadian government were near a deal.
For Honda, it’s part of a long-term bet on consumer demand for electric vehicles in North America. The Japanese company makes hybrid cars in the US and has said it plans to start manufacturing its first US-made fully electric vehicles in Marysville, Ohio next year.
For Trudeau and Ford, the announcement is a major milestone in their quest to secure a share of the North American auto business for Canada as the industry retools toward EVs. The two politicians have already pledged tens of billions of dollars to convince other manufacturers, including Volkswagen AG, to build huge EV battery plants in the country.
Thursday’s announcement will see Honda pledge to build a new battery assembly plant in Alliston, a town that’s a little more than an hour’s drive north of Toronto, where it produces gasoline-powered Honda CR-V and Civic models. Existing plants there will be expanded for electric vehicles, according to a person with direct knowledge of the plan, speaking on condition they not be identified.
Honda also plans to invest in a cathode materials facility and a battery components plant in Ontario, but those will involve other companies and the exact details will likely come later, the person said.
Federal government support for Honda’s investment is in the form of tax credits for clean manufacturing and electric vehicle production. But the precise cost to the public treasury will depend on how much Honda actually spends in Canada. The province of Ontario will subsidize some of the capital costs of the project, and may also provide cash for needed infrastructure upgrades such as new roads and sewers, the person said.
The subsidies are structured differently from the ones Canada promised last year to Volkswagen, Stellantis NV and Sweden’s Northvolt. Those companies received contracts that will pay a portion of the cost of each battery produced in their Canadian plants — in effect matching the money that’s available to EV battery makers under the US Inflation Reduction Act.
Honda was not offered a production subsidy, government officials have told Bloomberg. Trudeau has repeatedly said Canada can only afford to go so far in matching US manufacturing incentives.
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