A Honda dealership in Tokyo. The Japanese automaker is postponing EV expansion plans in Ontario for two years, though the move won't affect jobs at an existing Honda plant in Alliston, Ont.RICHARD A. BROOKS/AFP/Getty Images
Honda Canada says it is delaying a $15-billion electric-vehicle project in Ontario for two years amid weak demand for EVs, dealing more bad news to the province’s automotive sector.
The project includes retooling the company’s Alliston, Ont., assembly plant, a new battery plant nearby and two parts facilities elsewhere in Ontario. It was expected to create at least 1,000 jobs, producing as many as 240,000 cars a year by 2028.
Ken Chiu, a spokesman for Honda Canada, said the decision announced Tuesday has no impact on current employment or production levels at the Alliston plant.
It comes at a tough time for Canada’s auto industry, which has announced thousands of layoffs, as U.S. President Donald Trump’s tariffs take a toll. And it represents a setback for a project that was unveiled last year with great fanfare and backed with billions of dollars in government subsidies.
“It’s really about the marketplace demand, not tariffs in this case,” Mr. Chiu said. “The company will continue to evaluate the timing and project progression as market conditions change.”
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Richard Norcross, mayor of New Tecumseth, which includes Alliston, said Honda has been an important part of the community for more than 40 years, and is the region’s largest employer. Several companies in the region supply the plant.
“We are disappointed that the project is delayed,” Mr. Norcross said by phone, adding he is glad the Japanese automaker has committed to maintaining its existing plant. That plant makes the CRV and Civic, mainly for the U.S. market, with annual production of 420,000 vehicles.
Then-prime minister Justin Trudeau, Ontario Premier Doug Ford and other political leaders were on hand for the project’s unveiling last year, as Canada was making a broad push to be a leader in the automotive industry’s transition to electric vehicles.
Like other EV projects, it involved hefty public subsidies. The federal government offered up to $2.5-billion in tax credits for clean-technology and electric-vehicle supply chain investments, and Ontario pitched in up to another $2.5-billion for construction and site-servicing costs.
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U.S. sales of battery-electric vehicles rose sharply until 2023 but have levelled off, according to data from Anderson Economic Group. The fourth quarter of 2024 saw 308,000 vehicles sold, for a 6.5-per-cent market share, compared with 305,000 in the same period of 2023.
U.S. lawmakers this week are set to vote on a proposal to kill US$7,500 tax incentives to buy EVs, along with fuel-efficiency rules to spur the production of greener automobiles.
Mr. Trump has imposed 25-per-cent tariffs on most foreign-made cars, discounted based on the level of U.S. content.
The move is expected to drive up vehicle prices and reduce demand even further.
“The market-cooling consequences of U.S. tariff actions continue to be felt by everyone, Honda included,” said Flavio Volpe, head of the Automotive Parts Manufacturers’ Association, which represents 230 Canadian parts suppliers. He said Canada needs to find a solution to the tariffs that restores the confidence of companies driving large investments.
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Mr. Ford told reporters Tuesday he’s spoken with Honda and is confident that the company will continue with its plans.
The Ontario Premier added that his government will hold auto manufacturers “accountable” for investments that the provincial and federal governments have made in their facilities.
Asked how U.S. tariffs are affecting auto investments, Mr. Ford said that Mr. Trump is making deals with other countries and he’s “very confident” that Prime Minister Mark Carney will be able to work alongside Mr. Trump to come up with a “mutually rewarding relationship.”
Automakers General Motors Co. and Stellantis NV have in recent days announced layoffs, shift reductions and temporary shutdowns at Ontario plants in Oshawa, Ingersoll and Windsor.
In April, Honda denied reports it was considering moving some Ontario production to the United States because of tariffs. The carmaker also produces the CRV in Indiana and Ohio, and the Civic in Indiana.
Volkswagen AG is on track to begin producing EV batteries at its plant in St. Thomas, Ont., known as PowerCo Canada, in 2027, spokesperson Tegan Versolatto said in a statement. The company announced the $7-billion project, which includes $700-million in subsidies from Ottawa and $500-million from the Ontario government, in 2023. It is in the early stages of construction.
Another EV-related project, a Quebec plant that will produce battery materials known as cathodes, is also on schedule, one of its partners said. The joint venture of General Motors and South Korea’s POSCO Future is expected to cost more than $600-million, with financial support from the federal and Quebec governments accounting for about half the price tag. The project, called Ultium CAM, is due to begin production in 2026, said GM Canada spokeswoman Jennifer Wright.
A $7-billion battery plant in Quebec, launched by Northvolt AB, is stalled after its parent company filed for bankruptcy protection in the U.S. and its home base of Sweden, blaming the downturn in demand as the global industry struggles to compete with China.
Canada went all in on EVs and batteries in recent years, with governments, automakers and their partners announcing billions of dollars in plants in Ontario and Quebec, in expectation that sales of zero-emissions cars and trucks would remain on a steep trajectory. But global sales slowed as consumers balked at rising costs. In January, Mr. Trump scrapped a target, set by former president Joe Biden, for 50 per cent of new cars sold in the U.S. by 2030 to be electric. Meanwhile, Mr. Trump’s tariffs on auto-sector imports have added a new layer of uncertainty for the industry.
Regardless of Honda’s reasons for delaying its EV plans, it shows that Canada has to do a better job of defining in which aspects of the industry it has competitive advantages, said Matthew Fortier, chief executive officer of Accelerate. His organization is made up of companies and organizations from several industries aiming to build the country’s EV supply chain. He said Canada holds advantages in the development of critical minerals, ramping up battery materials processing and technological innovation, areas that could counteract China’s dominance.
“I really think Canada still has an important opportunity in EVs in front of us, but we can’t wait any longer,” Mr. Fortier said.