Province lands another mega auto investment deal, secures place in EV battery manufacturing.
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The expansion of Honda Canada’s production facilities north of Toronto will be a bigger investment than the EV battery facilities of Volkswagen and Stellantis combined. Honda is set to announce their plans to produce electric vehicles and EV batteries at their campus in Alliston and further production of battery parts with a partner.
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The announcement, scheduled for Thursday morning, almost didn’t happen as the Trudeau government tried to steer part of the investment towards Quebec. Industry Minister Francois Phillipe Champange has been trying to direct investment in the EV battery supply chain towards Quebec.
In this instance, Ontario Premier Doug Ford pushed hard for the full investment to be in Ontario and he won. Honda, through its partnership with Asahi Kasei — a diversified Japanese firm specializing in chemicals — will establish parts production in eastern and southwestern Ontario with the assembly happening at Honda’s existing plan in Alliston.
The facility already produces Honda’s popular CRV and Civic models in Alliston, a facility with two assembly plants that date back to 1986.
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One government source, speaking on background, said the total investment by Honda in their facilities will top $13 billion.
The announcement comes as the EV sector is hitting a bumpy patch and the Trudeau and Ford governments are under criticism for being too generous with the VW and Stellantis deals. This deal with Honda will follow a much different structure in terms of how the federal and provincial governments will support it.
With both VW and Stellantis, the Trudeau government offered production tax credits that mirrored what the Biden administration was offering through the Inflation Reduction Act (IRA). Under those terms, the companies were not given any funds up front but were offered tax breaks if employment and production quotas were met.
Due to timelines, the competition for critical mineral inputs and other factors, it’s doubtful that either company will ever see the full tax breaks, reportedly valued at $13.2 billion for VW and $15 billion for Stellantis.
Canada’s tax breaks in those deals only exist if the IRA remains in place and with an American election this fall, the unpopular measure could be killed stateside. Honda’s deal is being described as less generous but with more stability than those agreed to by Stellantis and VW deals.
The feds are offering two different tax credits to secure the Honda investment.
The Clean Technology Investment Tax Credit offers a refundable credit equal to 30% of the cost of investments in new machinery and equipment for EV production. The Electric Vehicle Supply Chain Investment Tax Credit offers a further 10% for companies that invest in all three areas the government is looking to land here, EV assembly, EV battery production and cathode development.
The Ford government’s contribution to securing the deal, which they took the lead on months ago, is focused on supporting Honda’s capital investment in their new plants in Alliston. That generally means assisting with the infrastructure needed to get the plant up and running.
The Alliston plant currently employs 4,200 people, according to Honda. This expansion for both vehicle assembly and battery production will add well over 1,000 additional jobs while securing the existing employment and manufacturing output.
Watching this deal from the wings will be Toyota Canada.
Toyota found out, via the media last fall, that the Trudeau government was rejecting their proposal for an EV battery facility as too expensive. It was an odd moment for a government that has courted the industry and asked for proposals.
While the feds walked away, the Ford government in Ontario has tried to keep Toyota at the table.
Toyota opened its first Canadian assembly plant in 1988 and now operates three plants — two in Cambridge and one in Woodstock — employing more than 8,000 people. The company has been less aggressive in the EV market than others saying they believe hybrids are needed at the moment with a more gradual move towards full electrification.
That said, they invested in the EV space with an $8 billion announcement in October 2023 for a facility in North Carolina and $1.3 billion earlier this year in Kentucky.
With Honda now secure, landing Toyota becomes the next big task for the Ford government.
“It’s coming, don’t worry,” Premier Doug Ford said when asked by The Toronto Sun about Toyota.
With close to $40 billion in auto investments landed in the last three years, Ontario is on a streak, don’t count Toyota out.
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