Honda pauses planned EV factory in Canada amid tariff war

Honda announced that it is pausing about $15 billion in planned EV investments to build electric vehicle and battery factories in Canada amid uncertainty over trade.

It’s the latest example of Canada’s backing the US plan backfiring.

A few years ago, Canada sided with the US in its plan to save the US auto industry, which was falling behind the rest of the world in the transition to electric vehicles.

Canada agreed to heavily tariff Chinese EVs to keep them away from the North American market, which mainly helps the US auto manufacturing industry, and in return, Canada’s EV production was included in Biden’s IRA to encourage foreign automakers to invest in EV production in both US and Canada to get access to the US market.

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However, when Trump came into power earlier this year, he threw a wrench into this entire plan by canceling IRA funding, planning to kill the EV tax credit, and placing tariffs on many countries, including Canada.

It has resulted in planned investments in the EV sector in Canada to cool down.

Now, one of Canada’s most significant EV investments has been paused.

Honda has announced that it is pausing for two years its plan to establish a massive new EV production base in Canada:

“Due to the recent slowdown of the EV market, Honda Motor has announced an approximate two-year postponement of the comprehensive value chain investment project in Canada. The company will continue to evaluate the timing and project progression as market conditions change.”

The investment was announced just over a year ago. It was supposed to include a new EV factory in Ontario and a battery factory, totaling more than $10 billion in investments.

It was supposed to create over 1,000 jobs in Ontario and help retain the 4,200 jobs at Honda’s current assembly plant in Ontario, which are threatened by the electric transition.

Electrek’s Take

Canada is taking a beating here and all for mostly just protecting the US auto industry.

As I have been saying for a while, at this point, you should just invite the Chinese automakers to join.

You can do a deal à la India, where you remove tariffs for Chinese automakers willing to invest in the EV supply chain in Canada.

There’s no point in protecting the US automakers if the US is purposefully destroying the Canadian auto sector.