Honda Commits to E.V.s With Big Investment in Canada

Honda Commits to E.V.s With Big Investment in Canada
Honda Motor on Thursday said it and several suppliers will invest $11 billion to build batteries and electric cars in Ontario, a significant commitment from a company that has been slow to adopt the technology.

Like Toyota and other Japanese automakers, Honda has emphasized hybrid vehicles, in which a gasoline engine is coupled with an electric motor, 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 sold in the United States.

But the investment next to the company’s factory in Alliston, Ontario, near Toronto, is a change in direction, raising the possibility that Honda and other Japanese automakers could use their manufacturing expertise to lower 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 the 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 restructuring its main plant in Marysville, Ohio, near Columbus, to produce electric vehicles by 2025. Together with LG Energy Solution, a Korean company, Honda is investing $4.4 billion in a new battery plant 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 plant in Ontario will be able to produce as many as 240,000 electric vehicles a year when it starts operating in 2028, Honda said. By 2040, Honda plans for all of its vehicles to be electric, a firmer commitment than any other Japanese automaker has made.

Toyota, which has faced criticism from environmental groups for its focus on hybrids rather than fully electric vehicles, said Thursday it will expand a plant 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 previously announced that it will begin producing batteries next year at a $13.9 billion plant in North Carolina.

Canadian leaders have wooed automakers with financial incentives that roughly match the tax breaks the United States offers car 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. Canadian-made vehicles can qualify for U.S. federal tax credits. $7,500, which is only available for cars made in North America.

Volkswagen said last year it would invest up to $5 billion to build a battery factory in St. 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 investing in electric vehicle projects, Chrystia Freeland, Canada’s 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 much of its electricity from nuclear and hydroelectric plants, which allows automakers to advertise that their vehicles are made with energy that produces no greenhouse gas emissions.

“As we aim to run our business with zero environmental impact, Canada is very attractive,” Toshihiro Mibe, Honda’s chief executive, said Thursday in Alliston.

Honda will also work with partners to convert raw materials into battery components, he said. By maintaining control over the supply chain, a strategy known as vertical integration, companies like Honda hope to lower costs and make electric vehicles more affordable. BYD, the Chinese automaker, has undercut Tesla and other competitors by controlling mines, raw material processing and battery manufacturing.

However, the recent decline in lithium prices has raised questions about whether mining the metal in Canada will be competitive with low-cost operations in Latin America or Australia.

Political leaders justify spending taxpayers’ money to attract companies like Honda because car factories also generate thousands of jobs.

Jaan at the supplier. One example is Asahi Kasei, a Japanese company that said Wednesday 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 expects to also receive financial support from Canada and Ontario.