Honda plans a multi-billion-dollar EV and battery manufacturing complex in Ontario, with new federal incentives
Canada's electric vehicle (EV) supply chain may see significant expansion soon, fueled by potential incentives from the federal budget aimed at attracting companies like Honda Motor Co. Ltd. to establish manufacturing facilities, as reported by The Financial Post.
Reports from Bloomberg, based on unnamed sources, indicate that Honda is on the brink of announcing a multi-billion-dollar investment to build a plant in Ontario, which would be larger than any current manufacturing complex in the country.
Honda has a longstanding presence in Alliston, Ontario, where it manufactures vehicles and engines. However, the company has not yet disclosed how it plans to adapt these operations to meet Canada's upcoming zero-emission vehicle mandate, which will be phased in from 2026 to 2035.
According to Brendan Sweeney, managing director of the Trillium Network for Advanced Manufacturing at Western University, government policies appear to be aligning to encourage Honda to invest in a new EV plant.
He noted, “There’s a lot of breadcrumbs to follow,” suggesting that an announcement could be imminent.
The federal budget has introduced a 10 percent investment tax credit for building costs related to key segments of the EV supply chain, including EV assembly, battery vehicle manufacturing, and battery cathode production.
This move has sparked discussions about Honda's potential plans, especially following a report by Nikkei Asia in January, which speculated on a US$14bn project that might include EV and battery manufacturing.
Despite the speculation, Honda Canada remains reserved about its future. Spokesperson Ken Chiu commented, “Honda Canada is considering a number of initiatives and is in contact with governments at all levels as we move into the electrified era,” emphasizing the company's goal of achieving 100 percent electrified vehicles by 2040 without sharing specific details about increasing local production capacity.
The discussions about Honda's investment come at a time when the Canadian government has already facilitated major investments in the EV sector.
This includes a $7bn battery cell manufacturing plant by Volkswagen AG in St. Thomas, Ontario, and a $5bn battery cell manufacturing plant in Windsor, Ontario, by Stellantis through a joint venture with South Korea’s LG Energy Solution Ltd.
Both ventures benefited from production tax credits.
Critics argue that such government incentives may negate economic benefits, citing a Parliamentary Budget Office estimate that the VW deal could cost the federal government $16.3bn in direct and tax support, with only a marginal impact on the economy.
However, proponents like Sweeney criticize these models as overly simplistic, noting that much of the federal support is based on production tax credits tied to actual manufacturing output and EV sales.
The Canadian government's strategy may evolve from relying on production tax credits, reflecting a desire to chart its own course rather than follow precedents set by policies like the US Inflation Reduction Act.
As the situation with Honda develops, it will become clearer what incentives have been offered and whether they parallel those provided to other major automakers.
