Ottawa, Honda to hold talks on potential EV factory in Canada

Open this photo in gallery:

Federal officials are planning to meet this week with Honda HMC-N representatives about the possibility of the Japanese automaker building an electric-vehicle factory in Canada, adding another name to the list of manufacturers Ottawa is courting as part of a multibillion-dollar effort to transform the domestic auto industry ahead of a shift away from fossil fuels.

The meeting has not been publicly announced, but a senior government official told The Globe and Mail on Monday that it will take place this week, and that several federal departments will participate. The official said there had already been a meeting in December between federal representatives and Canadian and international personnel from Honda.

The Globe is not identifying the official, because they were not authorized to comment publicly on the discussions.

Japanese news group Nikkei reported on Sunday that spending on the potential electric-vehicle plant could reach $18.5-billion, and that the facility could also produce vehicle batteries.

If Honda’s investment is near that reported figure, it would be by far the biggest by an automaker in Canadian electric-vehicle production to date, dwarfing the roughly $7-billion Volkswagen Group battery factory coming to St. Thomas, Ont., and the roughly $5-billion battery plant being built by Stellantis NV STLA-N and LG Energy Solution in Windsor, Ont.

The Honda facility would be a cornerstone of the company’s effort to play catch-up in the race to serve the growing market for fully electric vehicles. It previously built its strategy around hybrid electric vehicles, for which its assembly plant in Alliston, Ont., is currently being retooled.

And it may represent the latest test of Canada’s willingness to match massive subsidies being offered by the United States, as Ottawa seeks to build a domestic electric-vehicle supply chain in advance of an expected global move away from gas-powered cars and trucks. Although the federal and Ontario governments have committed up to $15-billion in production subsidies for the Stellantis-LG plant, and up to $13.2-billion for the Volkswagen plant, Ottawa has since been non-committal about extending such deals to other automakers.

Honda has been meeting regularly with federal officials over the past few months, according to the federal lobbying registry. But the registry does not clearly say what topics were discussed.

The registry shows a Nov. 27 meeting with Natural Resources Canada officials, a Nov. 15 meeting with a senior Innovation Department official and a Nov. 2 meeting with a senior Transport Canada official. The month before, Honda met with policy advisers in the office of Deputy Prime Minister and Finance Minister Chrystia Freeland. The company’s representatives also met with Environment Minister Steven Guilbeault’s chief of staff, Jamie Kippen.

Francesco Sorbara, an MP who chairs the Liberal auto caucus, and whose Ontario riding of Vaughan-Woodbridge is just south of the existing Honda plant in Alliston, said opening a Canadian electric-vehicle plant would make sense for the automaker.

“It’s only natural, with Honda being in Canada for 50 years,” he said. “With its operations in Alliston, our work force, the trade agreements bolstering our case and this transition to a clean energy supply, Canada and Ontario are uniquely positioned for Honda.”

Nikkei reported that Honda is looking at several potential sites, including one next to its existing factory in Alliston. The automaker expects to decide by the end of 2024, with the new facility to go into operation as early as 2028, the Japanese outlet said.

Vanessa De Matteis, a spokesperson for Ontario’s Economic Development Minister, Vic Fedeli, would not confirm any details related to the potential electric-vehicle plant, but said the province continues to seek global investments.

John Bordignon, a spokesperson for Honda Canada, said in a statement over the weekend that the automaker “is considering a number of initiatives as we move into the electrified era.” He said Honda is currently focused on what he called the automaker’s “EV Hub,” in Ohio, where it will begin production of electric vehicles and batteries in late 2025.

Honda’s Ohio investment was announced at about US$4.4-billion, suggesting the project under consideration in Ontario could be significantly larger.

While Honda appears to be considering new facilities for manufacturing both vehicles and batteries in Canada, it’s unclear whether the latter would be in partnership with another company. In Ohio, the company has partnered with LG, the South Korean battery maker. LG is also building the Windsor factory with Stellantis.

It’s also unclear what level of subsidy Honda might be seeking. Automakers have to date demanded that Canadian governments match a battery production tax credit offered in the United States. Canada has done so for the Volkswagen and Stellantis-LG plants, and also in the case of Swedish battery maker Northvolt AB’s planned facility in Quebec.

But U.S. grants for new or retooled vehicle assembly plants, with which Canada might also be competing in this case, are less predictable.

Brendan Sweeney, the managing director of the Trillium Network for Advanced Manufacturing, said that the complexity of the investments that Honda appears to be pursuing in Ontario could make them challenging for governments to back.

“The question is about how to best structure an incentive package for an investment that includes batteries, a new assembly plant and all the requisite machinery, and potential upgrades to existing facilities,” Mr. Sweeney said. “The ability to take on such a complex investment would represent a monumental achievement.”

Honda is not the only company currently testing Canadian willingness to continue offering billions of public dollars to back electric-vehicle investments. Toyota Canada, another Japanese auto giant relatively late to the electric transition, has been seeking government backing for retooling its existing plants.

In addition to keeping pace with the U.S., Ottawa is under pressure to support such investments to demonstrate that new regulations requiring a growing share of vehicles sold in Canada to be electric will benefit domestic industry.

In December, the government announced the latest version of its proposal to end sales of new gasoline-powered or diesel-powered passenger vehicles by 2035.

With reports from Steven Chase and Laura Stone