Honda to build four EV and battery factories in Canada

Honda has announced building four electric vehicle and battery plants in Canada, which is increasingly becoming an eldorado for the global electric vehicle industry. The move from the Japanese automaker marks the largest automotive investment in Canadian history, representing a historic €10.2 billion investment.

Honda CEO Toshihiro Mibe announced during a press conference in Alliston, Ontario, where the new facilities will be established. According to Mibe, electric vehicle production at the site is slated to begin in 2028. Located just an hour away from Toronto, the plant aims to reach an annual production capacity of 240,000 vehicles, and the battery facility will produce 36 GWh annually.

Additionally, Honda plans to construct a cathode active material and precursor processing plant through a joint venture with Posco and a separator plant in partnership with Asahi Kasei. The locations for these latter two plants have not yet been determined.

New tax credit rules

The car assembly plant is expected to create 1,000 new jobs, adding to the 4,200 already employed at Honda’s two existing manufacturing plants in Ontario. Canadian Prime Minister Justin Trudeau, who attended the announcement, highlighted the strategic importance of the investment. Showcasing the country’s growing importance, he noted that Canada was the G7 country that attracted the most foreign direct investment per inhabitant last year.

Honda’s decision follows the Trudeau government’s introduction of a new tax credit. The credit provides businesses with a 10% rebate on the construction costs of new buildings involved in critical electric vehicle supply chain segments. Honda is the first automaker to utilize the EV supply chain investment tax credit.

Canada has a free-trade agreement with the US, so its homemade EVs are eligible for Biden’s Inflation Reduction Act (IRA) incentive when sold to American customers. This is a significant advantage, though it doesn’t set the country apart from Mexico, which enjoyed a boost in automotive industrial investment over the past years.

Canada’s favorable policy for new investors is part of broader efforts to face these challenges and prevent the relocation of factories to more cost-effective locations like Mexico.

A growing trend

Leveraging the tax incentives are abundant clean energy resources and access to crucial rare-earth materials. The local government has committed $2.5 billion in subsidies to support Honda’s project.

Honda’s investment is part of a more significant trend. Several other major automakers and suppliers, such as Stellantis, Sweden’s Northvolt, South Korea’s LG Battery Solution, and Volkswagen, have also announced significant investments in Canada’s electric vehicle sector.

Belgian materials processor Umicore is also building a manufacturing facility in Ontario for cathode active battery and precursor materials. It should start operations by the end of 2025 and provide enough material for 1 million BEVs by the end of the decade.