Honda to build electric vehicles, battery plant in Ontario, sources say

Honda Canada is set to build an electric vehicle battery plant near its auto manufacturing plant in Alliston, Ontario, where it also plans to produce all-electric vehicles, The Canadian Press has learned.

High-level sources with information on the project confirmed that the federal and Ontario governments will make the announcement this week, but could not yet give dollar figures.

However, comments on Monday from Ontario Premier Doug Ford and Economic Development Minister Vic Fedeli suggest this is a project worth between $14 billion and $15 billion.

Ford told a First Nations conference that there will be an announcement this week about a new deal that it said will double the size of the deal with Volkswagen announced last year. That electric vehicle battery plant to be built in St. Thomas, Ont., has a capital price tag of $7 billion.

Fedeli did not confirm whether Ford was referring to Honda, but spoke timidly after Monday’s question period about the amount of investment in electric vehicles in the province.

“We went from zero to $28 billion in three years and if the prime minister, if his comments are correct, next week we will announce $43 billion… in and around there,” he said.

The Honda facility will be the third EV battery plant in Ontario, following in the footsteps of Volkswagen and a Stellantis LG plant in Windsor, and while those two deals involved billions of dollars in production subsidies as a way to compete with the United States. With Inflation Reduction Act subsidies, Honda is expected to involve capital commitments and tax credits.

Federal Finance Minister Chrystia Freeland’s recent budget announced an EV supply chain investment tax credit of 10 per cent on the cost of buildings related to EV production, provided the company invest in assembly, battery production and cathode active material production in Canada.

This is in addition to the existing 30 percent tax credit for Clean Technology Manufacturing investment on the cost of investments in new machinery and equipment.

Honda’s deal also involves two key suppliers of parts for its batteries (cathodes and separators), and the locations of those facilities in other parts of Ontario will be announced at a later date.

The deal comes after years of meetings and discussions between Honda executives and the Ontario government, the sources said.

Prime Minister Justin Trudeau, Prime Minister Doug Ford and Honda executives were on hand in March 2022 in Alliston when the Japanese automaker announced hybrid production at the facility, with $131.6 million in assistance from each of the two levels of government.

Around the time of that announcement, talks began about potential further investment in electric vehicles, sources said, and negotiations began that summer.

Fedeli traveled to Japan that fall, the first of three visits to meet with Honda Motor executives about the project. Senior company officials in Japan also traveled to Toronto three times to meet with government officials, including twice with Ford.

During a trip by Honda executives to Toronto in March 2023, Ontario officials, including Fedeli, pitched the province as a top destination for investments in electric vehicles and batteries, part of a strong push by the government to realize the vision of Ford from one end to the other. The electric vehicle supply chain in the province is a reality.

Negotiations took a big step forward in July, when Ontario sent a formal letter to Honda Canada, indicating its willingness to offer incentives for a battery plant and electric vehicle production. Honda Canada executives then met with Ford in November and December.

The latest meeting sealed the deal, sources said.

Honda approached the federal government a few months ago, a senior government official said, and Freeland led her government’s negotiations with the company.

The project is expected to involve the construction of several plants, according to the source.

– With files from Nojoud Al Mallees in Ottawa.