LAS VEGAS -- Honda Motor is considering building an electric vehicle plant in Canada, with the project to possibly involve in-house production of batteries, Nikkei has learned.
Overall spending on the project could reach 2 trillion yen ($14 billion), making it one of the Japanese automaker's largest investments as it hopes to catch U.S. and European rivals in EV production.
Honda is looking at several potential sites, including next to an existing automobile factory in the province of Ontario. It expects to decide by the end of 2024, with the new facility to go onstream as early as 2028.
Honda already has plans to make EVs and batteries in the U.S. state of Ohio starting in 2026, so the proposed Canadian EV plant, if it goes online, will become its second in North America.
Canada announced last month a plan to effectively end sales of new passenger vehicles powered only by gasoline or diesel in 2035. The country also has plentiful renewable energy sources, so its carbon footprint per unit of electricity generated is relatively low. This prompted to Honda to consider building EVs in Canada.
For Honda, North America accounts for roughly 40% of its global sales. It expects to sell about 1.6 million vehicles there in the current fiscal year ending March 31, but most of these are gasoline-powered. Since Honda aims to have EVs account for 40% of North American sales in 2030 and 80% in 2035, the new plant is certain to become a key production hub.
Honda plans to mass-produce batteries in the U.S. state of Ohio starting in 2025 through a partnership with the world's third-ranked LG Energy Solution of South Korea. But in Canada, Honda intends to make batteries on its own. It is currently researching new technologies, including solid-state batteries, with many companies. It may join hands with these partners on battery production in Canada.
Honda's earlier plan to develop low-priced EVs with General Motors and sell them starting in 2027 was canceled last year. This year it will start selling EVs that had production outsourced to GM, but it apparently seeks to increase EVs it produces on its own over the long term.
EV sales are showing signs of slowing in the U.S. partly due to rising interest rates. Ford Motor said it will postpone a plan to invest $12 billion on new EV manufacturing capacity, while GM is delaying the production of electric pickup trucks in Michigan. But Honda decided to move ahead with its plan on the view that EV demand will grow over the medium to long term.
The Biden administration has set a target of electric vehicles representing half new vehicles sold in 2030. Several states, including California, New York and Washington, will prohibit to sell gasoline vehicles by 2035.
To encourage the switch to EVs, the U.S. government offers tax breaks of up to $7,500 to buyers of EVs. For an EV to be eligible, it needs to meet certain requirements such as being assembled in North America and sourcing batteries from approved regions.
Honda can increase the chances that its EVs produced at the proposed Canadian plant will be eligible for the U.S. subsidies by procuring key battery materials such as lithium from within Canada.