Source: Gasgoo
Honda Motor is about to reach a deal with Canada. The Japanese automaker will produce electric vehicle and its components in Ontario.
The two sides are expected to announce the deal within a week. Honda will invest billions of dollars in new facilities for processing cathode active materials, batteries and assembling electric vehicles. This investment aims at making southern Ontario a key center for the company’s North American electric vehicle manufacturing plans. The Canadian government will subsidize part of Honda’s costs.
Honda currently operates a manufacturing facility in Alliston, Ontario. The plant is about an hour north from Toronto, and it builds CR-V and Civic models there. In North America, Honda also has plants in Ohio and Indiana that produce hybrid vehicles. In addition, Honda plans to build its first all-electric model in Marysville starting next year.
Image source: Honda
Negotiations between Honda and Justin Trudeau, the Prime Minister, have focused on an investment tax credit (ITC). The government would help Honda covering parts of the costs through ITC. In the deal with Honda, the main incentive, known as ITC, will provide a 30 percent tax break on costs of equipment. Finance Minister Chrystia Freeland also proposed a new tax credit in last week that the government would provide 10 percent tax break on company’s construction costs for electric vehicle manufacturing if a significant portion of its electric vehicle supply chain is in Canada.
Freeland has been closely involved in Canada’s negotiations with Honda. According to the media, the new tax credit was created specifically for the Japanese company, although other electric vehicle companies could receive the credit if they establish enough supply chains in Canada.
Earlier this year, Japanese media reported that Honda was considering a $14 billion investment in Canada, but the company has yet to make a final decision. A Honda spokesman also refused to respond on April 21.
After President Joe Biden signed the Inflation Reduction Act (IRA) in 2022 to provide financial help to companies that build electric vehicles in the United States, Trudeau’s government thought that the taxpayer have to support automakers in order to maintain its share of the North American auto business.
Since Ontario is the most populous province of Canada and many plants of auto company such as Ford, General Motor and Stellantis are located in there. Therefore, the auto industry is particularly important to Ontario.
