Honda Motor on Thursday said it and several suppliers would invest $11 billion to build batteries and electric cars in Ontario, a significant commitment from a company that has been slow to embrace the technology.
Like Toyota and other Japanese carmakers, Honda has emphasized hybrid vehicles, in which gasoline engines are augmented by electric motors, rather than cars powered solely by batteries. The Honda Prologue, a sport-utility vehicle made in Mexico, is the company’s only fully electric vehicle on sale in the United States.
But the investment adjacent to the company’s factory in Alliston, Ontario, near Toronto, is a shift in direction, raising the possibility that Honda and other Japanese carmakers could use their manufacturing expertise to push down the cost of electric vehicles and make them affordable to more people.
“This is a very big day for the region, for the province and for the country,” Prime Minister Justin Trudeau said at an announcement event in Alliston, where Honda manufactures the Civic sedan and CR-V S.U.V. The investment, which will create 1,000 new jobs, is the largest by an automaker in Canadian history, he said.
The company is also retooling its flagship factory in Marysville, Ohio, near Columbus, to produce electric vehicles in 2025. Along with LG Energy Solution, a Korean company, Honda is investing $4.4 billion in a new battery factory in Jeffersonville, Ohio.
The additional investment in Canada is a sign that Honda expects the technology to become more popular, despite a recent slowdown in sales. The factory in Ontario will be able to produce as many as 240,000 electric vehicles a year when it begins operations in 2028, Honda said. By 2040, Honda plans for all its vehicles to be electric, a firmer commitment than other Japanese carmakers have made.
Toyota, which has faced criticism from environmental groups for its focus on hybrids rather than fully electric vehicles, said Thursday it would expand a factory in Princeton, Ind., to produce a large electric S.U.V.
The company, the world’s largest automaker, will spend $1.4 billion on the Indiana project and create as many as 340 new jobs, the company said. Toyota has previously announced that it will begin producing batteries next year at a $13.9 billion plant in North Carolina.
Canadian leaders have been wooing carmakers with financial incentives that roughly match the tax breaks the United States offers to auto and battery companies under the Inflation Reduction Act, President Biden’s signature climate law. Canada’s federal and provincial governments want the country to become a major player in the electric vehicle supply chain. Vehicles made in Canada can qualify for $7,500 U.S. federal tax credits, which are available only to cars made in North America.
Volkswagen said last year it would invest up to $5 billion to construct a battery factory in Thomas, Ontario. Northvolt, a Swedish battery company, announced plans last year for a $5 billion battery factory near Montreal.
Honda will benefit from up to $1.8 billion in tax credits available to companies that invest in electric vehicle projects, Chrystia Freeland, the Canadian finance minister, said Thursday at the event. Ontario is expected to provide additional financial support.
Canada also has reserves of lithium and other materials needed to make batteries, and generates a lot of its electricity from nuclear and hydroelectric plants, which allows carmakers to advertise that their vehicles are made with energy that releases no greenhouse gas emissions.
“As we aim to conduct our business with zero environmental impact, Canada is very attractive,” Toshihiro Mibe, the chief executive of Honda, said Thursday in Alliston.
Honda will also work with partners to convert raw materials into battery components, he said. By retaining control over the supply chain, a strategy known as vertical integration, companies like Honda hope to cut costs and make electric vehicles more affordable. BYD, a Chinese automaker, has undercut Tesla and other rivals on price by controlling mines, raw material processing and battery manufacturing.
However, recent declines in the price of lithium have raised questions about whether mining the metal in Canada will be competitive with lower-cost operations in Latin America or Australia.
Political leaders justify spending taxpayer money to attract companies like Honda because car factories also generate thousands of jobs at suppliers. One example is Asahi Kasei, a Japanese company that said on Wednesday that it would spend $1.3 billion on a factory to produce components for batteries in Ontario.
Honda will be the plant’s main customer, Asahi Kasei said, but it will also sell to others. The supplier said it expected to also receive financial support from Canada and Ontario.
