Ottawa and Ontario Announce $15B Honda EV Deal
Japanese automotive giant Honda is investing $15 billion into four new
electric vehicle (EV) manufacturing plants in Ontario, Prime Minister Justin
Trudeau, Ontario Premier Doug Ford, and several Honda executives announced on
April 25.
The federal government is expected to invest $2.5 billion in the deal
through the EV Supply Chain investment tax credit and the proposed Clean
Technology Manufacturing investment tax credit. The government of Ontario will
also invest $2.5 billion in the form of direct and indirect incentives.
Honda Global CEO Toshihiro Mibe said Honda would be building the EVs
entirely in Canada from raw materials to finished vehicles, and will begin
production in 2028. Once the assembly plant is fully operational, it will
produce as many as 240,000 vehicles per year said a government statement.
Mr. Mibe confirmed Honda will be investing $15 billion in the project,
which includes an electric vehicle battery plant, retooling of an existing
plant in Alliston, Ontario, for assembly, as well as two key battery parts
facilities located elsewhere in Ontario.
“Honda is making steady progress to our goal to make battery electric
and fuel cell electric vehicles represent 100 percent of our vehicle sales by
2040,” he said.
Mr. Trudeau touted the deal as the largest automotive deal in Canadian history and stated that the investment would create over 1,000 manufacturing jobs.
“These investments will create well over 1,000 well-paying manufacturing jobs as well as many many construction jobs, and of course, jobs all across Ontario and the country for auto parts suppliers,” he said.
Mr. Trudeau noted that Canada has surpassed China as the number one
supplier of lithium-ion batteries saying, “Canada is recognized as the clean
economy global supplier of solutions for a net-zero carbon world.”
“This deal is another example of our two governments working together,”
Premier Doug Ford said, calling the deal a “game-changer for the industry.”
“It’s the largest auto investment in Canadian history. It’s a tremendous
win for Ontario, for our workers, for all of Canada,” he added.
The $15 billion investment includes the retooling of an assembly plant
in Alliston that will be able to fully manufacture electric vehicles. The new
battery plant will be the third in Ontario as Stellantis LG already has a plant
in Windsor and Volkswagen in St. Thomas.
Two other key battery parts facilities in Ontario are also part of the
deal, manufacturing cathodes and separators. The locations for the two key
battery parts facilities will be announced in the future.
The Honda deal is also linked to the 10 percent Electric Vehicle Supply
Chain investment tax credit, which is part of the 2024 federal budget. Honda is
also able to claim an existing 30 percent Clean Technology Manufacturing
Investment tax credit on top of the 10 percent credit.
The deal was briefly mentioned earlier this week
during a press conference with Deputy Prime Minister Chrystia Freeland in
Montreal. Though Ms. Freeland did not address the deal directly, she said, “Our
investment tax credits are playing a big role in making Canada so attractive
for investment.”
Last year, the federal government brokered a similar deal with German
automotive giant Volkswagen. According to Parliamentary Budget Officer (PBO)
Yves Giroux, the Volkswagen deal could cost Canadian taxpayers around $16.3
billion overall.
Mr. Giroux said Ottawa is likely to pay $12.8 billion in federal
production support, $700 million in contributions through the Strategic
Innovation Fund, and a further $2.8 billion in tax adjustments as part of the
deal.
The federal government has made a goal of selling only zero-emission electric vehicles
in Canada by 2035, starting with demanding auto manufacturers make at least a
fifth of their vehicles electric or plug-in hybrids by 2026, increasing to
three-fifths by 2030.
The plan has drawn criticism from Alberta Premier Danielle Smith who
argued last year that the regulations were “unconstitutional” and vowed to
challenge the implementation of them in Alberta.
Ms. Smith said she supported Albertans who wished to drive low or
zero-emission vehicles, but added, “these efforts must be led by and support
consumers and businesses, and the federal government has no legal or moral
authority to tell Albertans what vehicles they can and cannot buy.”
Interest in purchasing electric vehicles declined in Canada last year,
despite billions of dollars of public investment by the federal government, as
consumers expressed less intent to purchase an EV compared to the prior year.
A report released last November by the 2023 Consumer Reports’
reliability survey in the United States also claimed that EVs have 79 percent more problems
than gasoline-powered vehicles and that hybrids had 146 percent more problems.
The Canadian Press contributed to this report.
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