Honda has scrapped its $11 billion plan to build an EV factory in Canada following a slowdown in market demand and is preparing to end production of an electric vehicle developed jointly with GM, shifting its focus to hybrid vehicles in the U.S. instead.
Nikkei Asia reports that Honda Motor is set to indefinitely suspend its plan to build an electric vehicle (EV) factory in Canada amid ongoing weakening demand for EVs in the U.S., prompting the company to prioritize hybrid vehicles as the cornerstone of its North American strategy.
According to the report, Honda decided in May 2025 to postpone the construction of the EV and battery plants in Ontario by two years from the original plan announced in April 2024, targeting operations to begin by 2028.
However, after assessing that the short-term EV market is unlikely to recover quickly, the company decided to pause the project indefinitely and has begun discussions with the Canadian government, with the possibility of canceling the entire project depending on the direction of North American EV policies.
Previously, Honda planned to invest a total of 15 billion Canadian dollars, about 11 billion U.S. dollars, for an EV factory with a capacity of 240,000 units per year and a battery plant, having already secured government financial support and purchased land for the project.
The project aimed to benefit from tax credit incentives for EV buyers under the U.S. Inflation Reduction Act passed during President Joe Biden's administration in 2022. However, under Donald Trump's government, these incentives were canceled in September, causing many EV prices in the U.S. market to rise sharply.
Additionally, the U.S. relaxed fuel efficiency requirements for automakers in December, allowing manufacturers to meet targets without producing as many EVs as before. Meanwhile, unresolved trade negotiations between the U.S. and Canada add further uncertainty to the market.
At the same time, U.S. EV sales in the last quarter of the previous year fell 36% year-on-year, while hybrid vehicle sales surged to a record 19% market share, up from 11% the year before.
Consequently, Honda plans to cease production of the Prologue EV model, developed with General Motors, in the second half of this year and stop sales once current inventory runs out. The model was launched in 2024 but required significant dealer incentives to boost sales.
Earlier, Honda also ended production of the Acura ZDX EV and in March decided to cancel development of three more EV models for the North American market, including two flagship 0 Series models. The company expects to record losses of up to 2.5 trillion yen (about $15.6 billion) in fiscal year 2026 due to this EV strategy shift.
Honda also plans to reduce its global investment in electrification and software systems by fiscal year 2030 from the original plan of 7 trillion yen, refocusing its North American strategy toward hybrid vehicles.
Currently, Honda produces EVs in North America at its Ohio plant, where it invested $1 billion through 2025 to adapt production lines capable of manufacturing internal combustion engine vehicles, hybrids, and EVs on the same line.
Meanwhile, the Ohio battery plant, built jointly with LG Energy Solution initially for EV batteries, will be converted to produce batteries for hybrid vehicles and energy storage systems. Honda plans to acquire buildings and assets from the joint venture to enable switching production between hybrid and EV batteries according to government policies.
Honda's global vehicle sales dropped 8% last year to 3.52 million units, with the Chinese market hit hardest—a 60% decline from its peak in 2020—due to price competition with local brands. In contrast, North America remains a key revenue source, accounting for over 40% of total sales, driven by strong demand for gasoline-powered and hybrid vehicles.
However, Honda is not alone in facing challenges in the North American EV market. Nissan Motor canceled plans to produce two EV models in Mississippi, while Ford Motor, Stellantis, and GM have all slowed EV development or recorded significant impairment charges related to their EV businesses.
Source:asia.nikkei.com