Federal government and Ontario announce $15-billion Honda EV deal

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Honda Motor Co. HMC-N has announced a landmark $15-billion deal to make electric vehicles and their batteries in Ontario, backed by up to $5-billion in federal and provincial subsidies.

Touted by the two governments as the largest single investment in the history of Canada’s auto sector, the deal also makes Ontario the epicentre for the Japanese automaker’s North American rollout of EVs.

The bulk of Honda’s investment will be at its existing auto-manufacturing site in Alliston, Ont. That will include a vehicle-assembly facility there, scheduled to open in 2028 and eventually have the capacity to build 240,000 vehicles annually, and a new EV battery factory.

The plan will preserve Honda’s existing 4,200 jobs in Alliston while adding another 1,000 there, the two governments and the company say.

The investment also involves South Korea’s Posco Future M Co. Ltd. and Japan’s Asahi Kasei Corp., both of whom are to build joint-venture plants with Honda to make EV battery components – cathodes and separators – in other cities in Ontario. Those details are to be announced at a later date.

Both the scope of Honda’s investment and the way that governments will back it mark a pivot in Canada’s strategy to establish itself as a major player in the global race to build EV supply chains, as the auto sector, prodded by government deadlines, shifts away from making vehicles powered by fossil fuels.

This deal relies on federal tax credits, and provincial cash for capital costs. It does not include the same large per-battery subsidies featured in the other recent EV battery deals that were aimed at matching the enormous benefits on offer to auto manufacturers in the United States under the government’s Inflation Reduction Act.

Up to $2.5-billion will come from the federal government in tax credits it offers to clean technology and electric-vehicle supply chain investments, and up to $2.5-billion will come from Ontario for the costs of construction and servicing the site.

Other major announcements for new EV plants and battery factories – also with multibillion-dollar government help – have been made recently for Windsor, Ont., where auto giant Stellantis STLA-N and South Korea’s LG Energy Solution are building a massive facility, and for St. Thomas, Ont., where Volkswagen VWAGY was lured to build a gigafactory battery plant.

Honda’s battery factory is projected to have a somewhat lower production capacity than the one being built by Stellantis, and much lower than Volkswagen’s. However, factoring in the three other new facilities Honda is planning in Ontario – for producing battery components and for assembling EVs – its total announced investment is more than double either Volkswagen’s or Stellantis’s.

At the same time, the announced public subsidies for Honda’s facility are much lower than those for its competitors. Stellantis will cumulatively receive up to $15-billion in production subsidies from the federal and Ontario governments in its battery plant’s early years of operation, and Volkswagen will similarly receive up to $13.2-billion. (Ontario and Ottawa had previously put $131.6-million each into the Alliston plant, to help Honda retool to build new hybrid EVs.)

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The investment announced Thursday will make Ontario by far the largest hub for Honda’s rollout of EVs in North America. Its only other major EV-making on the continent is an approximately US$5-billion commitment in Ohio, involving a battery factory being built in partnership with LG Energy Solution, as well as a retooling of production lines at an existing vehicle assembly plant.

The deal was unveiled at the existing Alliston plant by Prime Minister Justin Trudeau and Premier Doug Ford. Mr. Trudeau called the deal historic. Ontario’s Premier called it a “game-changer” that shows his province’s skilled work force, green energy grid and deposits of the minerals needed for EV batteries have made it the top spot for EV investment.

But the multibillion-dollar taxpayer help for one of the world’s largest companies also faced criticism.

The federal Conservative industry critic, Rick Perkins, and the party’s trade and labour critic, Kyle Seeback, issued a joint statement saying the Trudeau government can’t be trusted to ensure the subsidies won’t create jobs for imported foreign workers – alluding to a controversy that erupted in Windsor last year, when union leaders complained that the Stellantis-LG joint venture was bringing in 900 South Korean temporary workers to set up the new plant.

Asked whether the billions being pumped into this new EV plant were worth it, both Mr. Trudeau and Mr. Ford were combative.

“This is generational. This is decades and decades down the road. What price do you put on that?” the Premier said, adding that the deal would create more than 28,000 spinoff jobs in the broader economy.

Mr. Trudeau claimed federal Conservative Leader Pierre Poilievre opposes government aid to create jobs in the EV sector – unlike Mr. Ford.

“I’m incredibly pleased to be able to be here with a Progressive Conservative like Doug Ford, who understands that investing in workers, investing in manufacturing, investing in the future of Ontario is how you build a strong economy for today and for the coming decades,” Mr. Trudeau said.

In an interview with The Globe and Mail after the announcement, Honda Motor Co. president Toshihiro Mibe said that while growth in consumer demand for EVs has recently flagged, he anticipates a more robust market by the time Honda’s vehicle assembly plant starts operations in 2028.

Asked why Honda was drawn to Canada for its biggest EV-related investment to date, despite the larger subsidies on offer in the U.S., Mr. Mibe cited access to critical minerals, a clean electricity supply and a strong work force with which Honda has experience over its four decades here.

He also hinted that Honda could attempt to grow out its own Canadian EV supply chain beyond the four components announced on Thursday, including around the mining and refining of battery materials.

“I recognize the need for further investment in Canada to reach our vision for the natural-resources value chain,” Mr. Mibe said.

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Ontario Economic Development Minister Vic Fideli said executives with the three companies met with him and the Premier in March in the rear sunroom of Mr. Ford’s home in Toronto’s Etobicoke neighbourhood to seal the deal over doughnuts from Tim Hortons. He said Ontario’s final offer was presented at a similar meeting with Honda bosses in December.

“It was very definitive from the Premier, his big mitt comes out to shake hands,” Mr. Fideli said. “This was sleeves rolled up and getting down to numbers, actual numbers, actual offers.”

In an interview, federal Industry Minister François Philippe-Champagne traced his conversations with Honda back to a 2022 meeting with the company’s chairman, Seiji Kuraishi. He said Mr. Kuraishi expressed interest, but stressed that Canada would need to be patient as Honda plotted its EV strategy.

Mr. Champagne said Canada was able to land this investment without matching U.S. production subsidies because longer-term considerations triumphed.

“Some people always focus on these incentives, which are fairly short-term,” he said. “But you know, when you’re looking at things of that magnitude, beyond $10-billion … you have to position yourself for what it’s going to look like 20, 30, 40 years from now.”