Honda is considering investing $18 billion in an electric vehicle factory in Canada.

Honda Motor, with the aim of expansion, is exploring the possibility of building an electric vehicle (EV) factory in Canada, potentially including an in-house battery production capacity. This plan represents a massive investment of $14 billion, aimed at positioning the Japanese automaker on equal footing with its American and European rivals in the EV sector.

In terms of implementation strategy and timeline, Honda is currently in the phase of analyzing several potential sites, with a focus on an existing automotive factory in Ontario. The final decision is expected to be made by the end of 2024, with the new factory anticipated to start operations by 2028. If successful, this facility will become Honda’s second factory in North America, complementing its planned production site in Ohio starting in 2026.

The decision by Honda is also influenced by Canada’s initiatives, announcing the phasing out of sales of gasoline or diesel vehicles by 2035, and benefiting from an abundance of renewable energy sources, thus reducing the carbon footprint per unit of electricity produced. These favorable conditions are encouraging Honda to consider Canada as a suitable location for EV production.

In terms of production and technological development objectives, currently the majority of Honda’s sales in North America are comprised of gasoline vehicles, but the future strategy aims to achieve 40% EV sales by 2030 and 80% by 2035. This Canadian factory would be crucial in achieving these ambitious goals.

Regarding batteries, while Honda has already planned for mass battery production in Ohio in partnership with LG Energy Solution starting in 2025, the company is considering producing its own batteries in Canada. This initiative is accompanied by an exploration of new technologies, including solid-state batteries, in collaboration with various companies, considering partnerships for battery production in Canada.

From a commercial perspective, Honda had previously canceled a project with General Motors to develop low-cost EVs. However, the Japanese company is moving towards increasing in-house production of EVs in the long term. As EV sales slow down in the United States, Honda is maintaining its long-term vision, anticipating an increase in EV demand in the coming years.

In terms of the American perspective and the impact on subsidies, in view of the goal set by the Biden administration – that half of all new vehicles sold by 2030 be EVs – and the bans planned by several states, Honda could take advantage of tax incentives offered by the US government to EV buyers. The sourcing of key materials such as lithium in Canada could allow vehicles produced in Honda’s Canadian factory to be eligible for these subsidies.

This initiative by Honda aligns with a global trend to accelerate the transition to cleaner vehicles and reduce the carbon footprint of the automotive industry.