Honda Motor said Thursday and several suppliers will invest $11 billion to build battery and electric cars in Ontario, a significant commitment from a company that has been slow to embrace the technology.
Like Toyota and other Japanese automakers, Honda has emphasized hybrid vehicles, in which gasoline engines are boosted by electric motors, rather than cars powered solely by batteries. The Honda Prologue, an SUV made in Mexico, is the company's only all-electric vehicle on sale in the United States.
But the investment adjacent to the company's plant in Alliston, Ontario, near Toronto, represents 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 accessible to 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 made 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 factory of batteries in Jeffersonville, Ohio.
The additional investment in Canada is a sign that Honda expects the technology to become more popular, despite the recent slowdown in sales. The factory in Ontario 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 have all its vehicles electric, a firmer commitment than those made by other Japanese automakers.
Toyota, which has faced criticism from environmental groups for its focus on hybrid vehicles rather than fully electric vehicles, said Thursday it will 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 previously announced it will begin making batteries next year at a $13.9 billion plant in North Carolina.
Canadian leaders have courted automakers 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 manufactured in Canada are eligible for US federal tax credits of $7,500, available only to cars manufactured 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 that invest in electric vehicle projects, Chrystia Freeland, Canada's finance minister, said at the event on 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, which allows automakers 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, Honda's chief executive, said in Alliston on Thursday.
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 accessible. BYD, a Chinese automaker, has undercut Tesla and other rivals by controlling mining, raw material processing and battery production.
However, recent drops in the price of lithium have 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 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 to build a factory in Ontario to make battery components.
Honda will be the plant's main customer, Asahi Kasei said, but it will also sell to others. The supplier said it expects to receive financial support from Canada and Ontario as well.