Table space for Honda’s major investment in Canada’s electric vehicle sector

When news of Honda’s soon-to-be-announced electric vehicle investment leaked to Bloomberg News on Sunday, Ontario Premier Doug Ford saw an opening to boast about his government’s success in entering the automobile battery business.

“We have overtaken China and knocked them off the pedestal for the first time ever,” he told the First Nations Main Mission Coalition convention on Monday morning, referring to Canada’s top ranking in a recent global supply chain ranking. “This is truly significant.”

Expect more superlatives when Honda Canada makes its official announcement in Allison, Ont. on Thursday, as government and industry leaders celebrate the fact that the company behind some of Canada’s most popular vehicles is settling in for the long haul in Canada’s EV sector.

“This could very well be Honda’s biggest investment anywhere in the world,” Flavio Volpe, the president of the Automobile Manufacturers Association of Canada, told CBC News. He called it a “double down” on Canada and “an announcement that I believe will be heard around the world.”

Honda doesn’t make speculative bets, he said. “They’ve been in Canada for nearly 40 years. They’ve never retreated, they’ve never pulled back. This is, for Canadian suppliers, an extraordinarily reliable customer to have.”

Enjoying the hype this announcement is generating means ignoring, for the time being, the reality that nearly all of Northern Ontario’s valuable minerals are years (if not decades) away from powering all the new EVs Canadians will be federally required to buy after 2035 to meet federal carbon emissions targets.

It means overlooking the fact that Ford’s government is still trying to secure the Indigenous partnerships and permissions it will need to fulfill its Ring of Fire mining ambitions. It means dismissing the failure so far of early consumer incentives and rising spring gasoline prices to spark a surge in EV sales, and the fact that many of the new EVs on Ontario’s roads were imported from a Tesla gigafactory in Shanghai.

“Here in Ontario, we have become a global leader in the electric vehicle revolution,” Ford boasted.

Ford said the deal coming this week will be “double the size of Volkswagen.”

The $7 billion VW battery plant now under construction in St. Thomas, Ont. covers roughly 150 hectares — over 200 football fields. It is “like a city in itself,” Ford said.

It was not clear from Ford’s comments whether he intended Honda’s new operation to cover twice the acreage of the Volkswagen plant, or if its investment is double the size of the Volkswagen deal. Either way, or not, it is historic.

In January, the Eastern news outlet Nikkei was the first to report that Honda was considering an investment of two trillion yen (about $18 billion Cdn) to establish an EV supply chain in Canada.

Ford’s economic trend minister, Vic Fedeli, appeared to confirm Thursday’s figures could be on that scale when speaking to reporters at Queen’s Park on Monday.

Ontario’s EV investments “went from zero to $28 billion in three years,” he said, before hedging slightly.

“If the premier, if his comments are accurate,” he added, “then next week we will be announcing $43 billion in EV, or a figure in and around there.”

So is Honda about to invest $15 billion in Ontario?

Not so fast. In a subsequent report published Tuesday, Nikkei said Honda was preparing a one-trillion yen announcement (roughly $8.8 billion.)

As the premier urged his Monday audience, “Stay tuned.”

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The timing of Honda’s announcement was a business decision — or alternatively, it is a happy coincidence for Prime Minister Justin Trudeau that it fell within the midst of his ministers’ post-budget marketing tour.

Only just a few months after Trudeau signalled that the federal government was running out of money for automobile subsidies — prompting fears that Toyota Canada would hit the brakes on additional Ontario expansion — a change in government policy apparently paid off.

Canada’s share of North American manufacturing may have been in jeopardy if the federal and provincial governments hadn’t stepped up with both funding tax credits and manufacturing subsidies to compete with the Inflation Reduction Act introduced by U.S. President Joe Biden.

Those billions were enough to land Ontario its first two battery plants: the VW plant in St. Thomas and the Stellantis facility in Windsor. Nonetheless, the Trudeau government warned at the time that their manufacturing subsidies are not sustainable.

The sweeteners provided to land this Honda deal are more predictable because they’re in step with the price of Honda’s funding, not future manufacturing levels.

In the 2023 federal budget, the Liberals introduced a tidy manufacturing investment tax credit that deducts 30 per cent of the cost of up-to-date equipment and equipment. Its implementation rules, C-59, have yet to pass; the Liberals hope it receives royal assent by June.

Last week, the 2024 federal budget introduced a ten per cent electric vehicle supply chain investment tax credit to offset the cost of buildings. Companies receiving the tax credit must invest in three components of the EV supply chain: EV assembly, battery manufacturing and manufacturing of cathode active material for these batteries.

Finance Minister Chrystia Freeland’s department took the lead in federal talks with Honda; her budget forecasts a $80 million expenditure on this tax credit over the next five years. The federal government has hinted it anticipates about $800 million in funding on eligible buildings between now and 2029.

Honda appears to be the well-known — and maybe the only — carmaker to assemble the vertical investments required to gain access to this credit, with a form of its services and products in Alliston as well as other yet-to-be announced expansions in Ontario.

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CBC News has confirmed that Honda is gearing as much as exclaim a multibillion-dollar deal to ticket electric autos in Canada. Though no longer your total significant ingredients are identified, Ontario’s premier hinted or no longer it is a long way the ‘largest deal in Canadian history.’

CBC News has not confirmed that a site earmarked for EV battery manufacturing in St. Clair township near Sarnia, Ont. is part of Honda’s negotiations. Fedeli said Monday that land in Wilmot township near Waterloo, Ont was not part of Honda’s plans.

Quebec’s economic system minister, Pierre Fitzgibbon, told reporters at the National Assembly on Tuesday that he was in talks to secure a share of Honda’s business at the industrial park in Bécancour, Que., where other automakers are setting up cathode materials manufacturing.

Fitzgibbon admitted he had been outbid by Ontario.

To reduction attract EV funding, Ontario’s 2023 provincial budget included a 10 per cent refundable corporate income tax credit for eligible investments in buildings, equipment and equipment, price as much as $2 million a 365 days for person companies.

The Toronto Star has reported that when the Stellantis deal was in jeopardy, the federal government convinced the Ford government to provide additional provincial subsidies in return for federal cooperation on the environmental assessments required to approve Highway 413.

It is not known whether a similar last-minute squeeze occurred in the Honda talks. Ontario Finance Minister Peter Bethlenfalvy’s comment in response to the April 16 federal budget alluded to this Highway 413 quid pro quo and revived Ontario’s request for the federal government to “eliminate duplicative reviews and processes that may be slowing down” Ring of Fire projects.

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Volpe said the unique principles hammered out during the NAFTA renegotiation talks anticipated the transition to electrified powertrain products and batteries by ensuring automakers could not source components offshore (China, essentially) without risking tariffs.

During a 2023 visit to Canada, Eastern High Minister Fumio Kishida called China a “central wretchedness.”

Geopolitically, Japan is great more comfortable working with Canada to supply the valuable minerals its automobile engineers want.

Final September, Japan’s economic system, change and funding minister Yasutoshi Nishimuravisited Ottawa with a delegation of Eastern businesspeople from its battery provide chain association (BASQUE) and companies like Panasonic Energy, Asahi-Kasei, Mitsubishi, Mitsui and Sumitomo. They signed memoranda of cooperation with Canadian companies about sharing skills and business intelligence.

This week’s Honda announcement will be Canada’s biggest EV funding deal up to now. Nonetheless it wasn’t the well-known and or no longer it is a long way now not anticipated to be the last.

Now that Honda has decided to establish its bet and become Ontario’s third EV battery maker, attention will turn to whether Toyota may reconsider becoming the fourth — and whether Canada’s clean power grids can accommodate more ambition.

“Each automobile firm is spending all of their future R&D bucks on electrified product or fuel cell mission product, anything that is zero emission,” Volpe said, dismissing the naysayers who’ve lost faith due to disappointing personal sales.

“We all know where we’re headed.”