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

Honda Canada is set to build an electric vehicle battery plant near its auto manufacturing facility in Alliston, Ont., where it also plans to produce fully electric vehicles.

The Canadian Press has learned that the federal and Ontario governments will make the announcement this week.

Senior sources with information on the project confirmed the deal but were not yet able to give any dollar figures.

Ontario Premier Doug Ford on Monday morning told a First Nations conference that there will be an announcement this week about a new deal that he said will be double the size of a Volkswagen deal announced last year.

That EV battery plant set to be built in St. Thomas, Ont., comes with a $7-billion capital price tag.

The Honda facility will be the third electric vehicle 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 of competing with the United States' Inflation Reduction Act subsidies, Honda's is expected to involve capital commitments and tax credits.

Federal Finance Minister Chrystia Freeland's recent budget announced a 10 per cent Electric Vehicle Supply Chain investment tax credit on the cost of buildings related to EV production as long as the business invests in assembly, battery production and cathode active material production in Canada.

That's on top of an existing 30 per cent Clean Technology Manufacturing investment tax credit on the cost of investments in new machinery and equipment.

Honda's deal also involves two key parts suppliers for their batteries -- cathodes and separators -- with the locations of those facilities elsewhere in Ontario set to 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, Premier 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, conversations began about a larger potential investment into electric vehicles, the sources said, and negotiations began that summer.

Ontario Economic Development Minister Vic Fedeli travelled to Japan that fall, the first of three visits to meet with Honda Motor executives about the project. Senior officials from the company in Japan also travelled to Toronto three times to meet with government officials, including twice with Ford.

During a trip by the Honda executives to Toronto in March 2023, Ontario officials including Fedeli pitched the province as a prime destination for electric vehicle and battery investments, part of a strong push from the government to make Ford's vision of an end-to-end electric vehicle supply chain in the province a reality.

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

The latter meeting sealed the deal, the sources said.

This report by The Canadian Press was first published April 22, 2024.