Honda Motor on Thursday said it would invest $11 billion to build batteries and electric cars in Ontario, a significant commitment from a company that has been slow to embrace the technology.
Like Toyota and other Japanese carmakers, Honda has emphasized hybrid vehicles, in which gasoline engines are augmented by electric motors, rather than cars powered solely by batteries. The Honda Prologue, a sport-utility vehicle made in Mexico, is the company’s only fully electric vehicle on sale in the United States.
But the investment adjacent to the company’s factory in Alliston, Ontario, near Toronto, is a shift in direction, raising the possibility that Honda and other Japanese carmakers could use their manufacturing expertise to push down the cost of electric vehicles and make them affordable to more people.
“This is a very big day for the region, for the province and for the country,” Prime Minister Justin Trudeau said at an announcement event in Alliston, where Honda manufactures the Civic sedan and CR-V S.U.V. The investment is the largest by an automaker in Canadian history, he said.
The company also plans to retool its flagship factory in Marysville, Ohio, near Columbus, to produce electric vehicles in 2026. The investment in Canada is a sign that Honda expects the technology to grow in popularity, despite a recent slowdown in sales.
Canadian leaders have been wooing carmakers with financial incentives as it tries to become a major player in the electric vehicle supply chain. Vehicles made in Canada can qualify for $7,500 U.S. federal tax credits, which are available only to cars made in North America.
Volkswagen said last year it would invest up to $5 billion to construct a battery factory in Thomas, Ontario. Northvolt, a Swedish battery company, announced plans last year for a $5 billion battery factory near Montreal.
Honda will benefit from up to $1.8 billion in tax credits available to companies that invest in electric vehicle projects, Chrystia Freeland, the Canadian finance minister, said Thursday at the event.
Canada also has reserves of lithium and other materials needed to make batteries, and generates a lot of its electricity from nuclear and hydroelectric plants, which allows carmakers to advertise that their vehicles are made with energy that releases no greenhouse gas emissions.
“As we aim to conduct our business with zero environmental impact, Canada is very attractive,” Toshihiro Mibe, the chief executive of Honda, said Thursday in Alliston. Honda will also work with partners to convert raw materials into battery components, he said.
However, recent declines in the price of lithium have raised questions about whether mining the metal in Canada will be profitable.