Honda Motor said Thursday that it and several suppliers would invest $11 billion to make 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 gasoline engines are supplemented by electric motors, rather than cars powered solely by batteries. The Honda Prologue, a sport utility vehicle manufactured in Mexico, is the company's only all-electric vehicle for sale in the United States.
But the investment adjacent 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 reduce the cost of electric vehicles and make them affordable for more people. people.
“This is a very important day for the region, for the province and for the country,” Prime Minister Justin Trudeau said at an announcement event in Alliston, where Honda makes the Civic sedan and CR-V SUV. 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. Together 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 Ontario factory will be able to produce up to 240,000 electric vehicles a year when it begins operations in 2028, Honda said. By 2040, Honda plans to make all its vehicles electric, a stronger commitment than other Japanese automakers have made.
Toyota, which has faced criticism from environmental groups for its focus on hybrid vehicles rather than fully electric vehicles, said Thursday it would expand a factory in Princeton, Indiana, to produce a large electric SUV.
The company, the world's largest automaker, will spend $1.4 billion on the Indiana project and create up to 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 courting automakers with financial incentives that roughly match the tax breaks the United States is offering 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 may qualify for US federal tax credits of $7,500, which are available only 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, Ont. Northvolt, a Swedish battery company, announced plans for a $5 billion battery factory near Montreal last year.
Honda will benefit from up to $1.8 billion in tax credits available to companies that invest in electric vehicle projects, Canadian Finance Minister Chrystia Freeland said at the event Thursday. 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, allowing automakers to advertise that their vehicles are made with energy that does not release carbon emissions. greenhouse gases.
“As we aim to conduct our business with zero environmental impact, Canada is very attractive,” Honda CEO Toshihiro Mibe 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 reduce costs and make electric vehicles more affordable. BYD, a Chinese automaker, has undercut prices for Tesla and other rivals by controlling mines, raw materials 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 auto factories also generate thousands of supplier jobs. One example is Asahi Kasei, a Japanese company that said Wednesday it would spend $1.3 billion on a factory to produce battery components 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.
