BAD BREAK

TARIFFS NOT TO BLAME FOR HONDA’S DECISION TO AXE FACTORY EXPANSION

The bad news is that Honda isn’t expanding its operation in Alliston to build an electric vehicle plant. The good news is that no government money has been handed over despite a promise of up to $5 billion when the project was announced two years ago.

The announcement on April 25, 2024, promised a $15 billion investment from Honda for a new EV assembly line and a battery plant. The federal government promised up to $2.5 billion in production tax credits and the provincial government promised up to another $2.5 billion in support.

“There is no money that has been released to Honda whatsoever, period,” said Ontario’s Economic Development Minister Vic Fedeli when asked about the issue last Wednesday.

News broke last Wednesday that Tokyo- based Honda decided to cancel plans to construct a “historic” $15 billion EV plant and battery manufacturing hub alongside the company’s existing assembly plant in Alliston. The plant was slated to open in 2028.

That announcement came one day after Honda announced a company-wide pivot away from EV’s towards hybrids for the North American market, citing both tariff pressures and glacial demand for full-EV vehicles.

On Parliament Hill, Prime Minister Mark Carney responded to the news by blaming U.S. President Donald Trump and his tariffs.

“There are challenges with the U.S. tariffs, unjustified tariffs in the auto sector. We continue to work with companies in the sector, helping them reposition, reinvest, supporting workers there,” Carney said.

You can blame Trump for Honda’s decision, but this has nothing to do with tariffs and everything to do with consumers not wanting EV’s.

The Biden administration had offered consumers up to $7,500 per vehicle to buy EV’s. They had also passed tailpipe emissions standards designed to force more consumers into EV’s in the coming years.

Shortly after he was elected, Trump eliminated the subsidy and the tailpipe emissions regulations. He then went a step further and revoked California’s ability to require all new vehicles to be zero emission by 2035.

“I’m all for electric. If you want to buy electric, you can buy electric,” Trump said in June when repealing California’s mandate. “You should be given the option.  Buy the electric car. Buy a gasoline-powered car. Buy a hybrid.”

Those moves pulled the rug out from under the EV market across North America.

Electric vehicle sales had been climbing in the U.S. and in Canada, but sales plummet every time that subsidies go away. In fact, just before expiration of the U.S. subsidy last year, battery electric vehicles made up 10% of new cars sold, but plummeted to about 5% after the subsidy was taken away.

In Canada, a similar thing happened.

In September 2024, there were 30,318 zero-emission vehicles – mostly battery electric – sold in Canada, which represented 18% of all new cars sold that month.