In a bid to expand its electric vehicle (EV) capabilities, Honda Motor (NYSE:HMC) has announced plans to invest approximately C$15 billion to establish a comprehensive EV value chain in Ontario, Canada.
The investment marks Honda’s efforts to meet the increasing long-term demand for EVs in North America.
“Today’s announcement is a historic investment by a manufacturer in the Canadian auto industry,” said Honda Canada President and CEO Jean Marc Leclerc in the company announcement.
“It proudly honors the highly skilled associates who have earned a global reputation for manufacturing excellence and represents Honda’s recognition of the long-term attractiveness of the Canadian electric vehicle manufacturing ecosystem.”
The proposed EV value chain will include the construction of an innovative EV assembly plant and a standalone battery manufacturing facility in Alliston, Ontario. Additionally, Honda plans to build a cathode active material and precursor (CAM/pCAM) processing plant through joint venture partnerships.
Once operational, the EV assembly plant is expected to produce up to 240,000 vehicles per year, with the battery manufacturing facility boasting a capacity of 36 GWh per year.
The project is projected to create over 1,000 new manufacturing jobs in Ontario, while also generating significant spinoff employment opportunities across various sectors.
“Today’s announcement is a game changer for manufacturing in Canada,” said Justin Trudeau, Canada’s Prime Minister. “Honda’s investment is a vote of confidence in Canada, in Canadian auto workers, and in our manufacturing sector. Together, we’re creating good-paying jobs, growing our economy, and keeping our air clean.”
Honda’s investment also aligns with its global initiative to transition towards carbon neutrality, with a target to achieve 100 percent zero-emission EV sales by 2040.
The move also involves supplementary investments that include retooling existing facilities and establishing a joint venture EV battery plant with LG Energy Solution (KSE:373220), with an expected investment of US$4.4 billion.
EV production at the Marysville Auto Plant is slated to commence in late 2025.
The company views the establishment of the EV value chain in Ontario as a strategic step towards achieving this goal, leveraging the region’s skilled workforce and supportive business environment.
Collaboration with the Canadian and Ontario governments will also play a crucial role in driving innovation and providing incentives to support the project. The federal government’s new Investment Tax Credits and provincial incentives aim to promote low-emission manufacturing and attract investments in EV supply chain segments.
North America’s EV landscape
The North American EV market is slated for substantial growth, driven by increasing EV adoption and supportive government initiatives according to a market forecast.
As the third-largest region in the global electric vehicle market, the region is projected to experience a compound annual growth rate (CAGR) of 16.1 percent during the forecast period. The market size is expected to soar from US$62.73 billion in 2022 to US$228.47 billion by 2030.
In the US, both consumers and the government are increasingly investing in electric mobility. The U.S. Department of Transportation’s approval of electric vehicle charging network plans for all states, Washington, D.C., and Puerto Rico, covering approximately 75,000 miles of highways, underscores the nation’s commitment to expanding EV infrastructure.
Canada, a key player in the North American market, also boasts untapped potential in the production of essential materials for EV components.
As one of the top five countries producing cobalt, copper, graphite, precious metals, nickel, and uranium, Canada’s expansion into lithium, magnesium, and rare earth production further strengthens its position in the EV market.
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Securities Disclosure: I, Giann Liguid, hold no direct investment interest in any company mentioned in this article.
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