Honda makes deal to build EV factory in Ontario: sources

One source, who spoke on condition they not be named, said the deal is worth billions of dollars, and would be based on federal funding through investment tax credits — rather than direct subsidies worth billions of dollars that attracted other automakers, including Volkswagen and Stellantis, to set up EV battery plants in Ontario — along with additional support from the provincial government.

A second federal government source confirmed the Honda agreement is coming, but did not provide any details — as did insiders at Queen’s Park.

Media reports revealing the accord prompted Premier Doug Ford to hail what he described as the “largest deal” yet in his government’s push — alongside Ottawa and Québec — to attract companies to set up manufacturing in Canada for the emerging industry of electric vehicle and their components.

Speaking in Toronto, Ford said Honda’s investment in Alliston would dwarf the massive Stellantis electric vehicle battery factory in Windsor and the even larger Volkswagen project in St. Thomas, each of which received billions of dollars in subsidies from Queen’s Park and the federal government.

Swedish battery manufacturer Northvolt has also committed to building a battery mega-factory outside Montreal, with $4.6 billion in subsides from Ottawa and Quebec City.

“Over the past three years alone, we’ve attracted over $28 billion in auto and EV battery investments — and folks, stay tuned,” Ford told the First Nations Major Projects Coalition meeting Monday.

“But this week, we landed a new deal. It will be the largest deal in Canadian history. It’ll be double the size of Volkswagen so stay tuned, we’ll be announcing it this week,” the premier enthused.

Ford noted Stellantis was spending $5 billion on a 4.2-million-square-foot facility in Windsor, and VW another $7 billion on a 16-million-square-foot gigafactory in St. Thomas that will be the fourth largest building in the world.

“Ontario now is the only place in the entire world — think of this — where the six largest automakers call home,” he said.

In a statement, Honda Canada spokesperson Ken Chiu declined to confirm the company’s plans, but said Honda is “considering a number of initiatives and is in contact with governments at all levels as we move into the electrified era.”

Chiu added that, “in order to achieve our 2040 electrification target of 100 per cent electrified vehicles, we are considering various options to increase local production capacity, however we have nothing further to share at this time.”

At Queen’s Park, provincial Economic Development Minister Vic Fedeli was tight-lipped while touting “the largest Canadian auto announcement ever.”

“It’s very exciting,” said Fedeli, declining to even specifically mention the word Honda due to commercial sensitivities.

“We’ve never talked about any of our prospects by name but I would say the scenario is that we do have incentives,” said the minister, referring to tax breaks and other sweeteners Queen’s Park and Ottawa have put in place.

“That’s where we think our tax dollars are best invested because we had 100,000 jobs that were at risk in the auto sector,” he said, pointing to competition stateside.

“Not only did we save those 100,000 jobs, we’ve created tens of thousands more.”

Asked about Ford Canada recently slashing EV production in Oakville, Fedeli emphasized “no money is distributed to any company until they’ve met their hiring goals and their construction goals.”

Bloomberg first reported that a deal with Honda, which has long been rumoured, was expected to be announced this week.

Honda’s potential $18.4-billion auto assembly and EV battery factory would expand the complex 107 kilometres north of Toronto that currently makes gasoline-powered Civics and CR-Vs.

Asked about that dollar figure, a federal government source declined to share specifics but said the total is “in the ballpark” of what will be announced with Honda.

Fedeli would only say that Ontario’s overall $28 billion in EV investments would balloon to around $43 billion within the next week, suggesting a $15-billion Honda investment.

To Flavio Volpe, head of the Automotive Parts Manufacturers’ Association, the prospect such a deal is “incredible.” He said it would be an even bigger coup after the federal government signalled there would be no more direct subsidies like those it used to land EV factories from Stellantis, Volkswagen and Northvolt in Quebec.

Volpe pointed to a new measure unveiled in the recent federal budget, which promised a new “electric vehicle supply chain investment tax credit” worth 10 per cent of the cost that companies put toward buildings used in “key segments” of the industry.

Volpe said that tax credit seems tailor-made for major companies like Honda, and noted that Ottawa and the Ontario and Quebec governments are also still trying to court Toyota — another major Japanese automaker — to set up electric vehicle manufacturing in Canada.

If the tax credit helped attract a big company like Honda, that would mark a significant victory for the government’s shift from direct subsidies to a simpler offering that doesn’t need to be negotiated with the same depth.

That could position Canada to better compete for jobs and manufacturing in the sector with the United States, which has its own massive suite of incentives under President Joe Biden’s Inflation Reduction Act.

“I’ve got to give them full credit, no pun intended, on (potentially) pulling in a big fish — maybe the biggest — with credits,” Volpe said.