Japanese auto giant Honda has pumped the brakes on its $15 billion plan to build an electric vehicle supply chain in Canada, blaming "changing market conditions” for a decision that deals a serious blow to Canada’s EV manufacturing ambitions.

Slowing demand for EVs in North America and US tariffs on Canada’s auto sector, the company said, had forced a two-year pause for a plan that includes an EV assembly plant and a stand-alone battery facility in Alliston, Ont., where Honda makes the Civic compact and CR-V crossover models.

“Due to the recent slowdown of the EV market, Honda Motor has announced an approximate two-year postponement of the comprehensive value chain investment project in Canada,” Honda Canada said in a statement to Canada's National Observer.

“The company will continue to evaluate the timing and project progression as market conditions change. This decision has no impact on current employment levels or production at the Honda manufacturing facility in Alliston,” it added.

The announcement came nearly a month after Honda refuted a media report that Japan’s number two automaker planned to shift its operations in North America and produce 90 per cent of the vehicles it sells in the US from plants in that country.

'Accountable for any support'

Speaking at a press conference in Pickering, Ont. on Tuesday, Ontario Premier Doug Ford said he had spoken to Honda executives who assured him that their expansion plans in Alliston remained intact.

“We’re very confident that Honda will continue producing vehicles right here in Ontario,” Ford said. 

“We’re going to hold each auto manufacturer accountable for any support we’ve provided. We’ll make sure they meet their commitments and continue manufacturing vehicles in Ontario,” he added.

Global auto giants and battery-makers have pledged $46.1 billion toward a Canadian EV supply chain since 2021, with federal and provincial governments contributing $52.5 billion through subsidies and tax credits. Honda was due to receive $5 billion in provincial and federal support, according to the Office of the Parliamentary Budget Officer.

Ford acknowledged the growing uncertainty over US trade policy and tariffs, but remained optimistic that future trade negotiations would help ease tensions.

“I’m very confident Prime Minister Carney is going to work alongside President Trump to come up with a mutually rewarding relationship when it comes to tariffs,” he said. 

“As I always say—you can’t unscramble an egg that’s been around since 1965. You have to make the omelet bigger, and that’s exactly what we’re proposing with President Trump,” Ford said, referring to the decades old Canada-US auto pact.

Almost 70 per cent of all Honda vehicles sold in Canada are manufactured domestically, and 99 per cent are built using North American supply chains.

Dark clouds have gathered for months over the long-term future of auto manufacturing in Ontario as the Canada-US trade war has dragged on. General Motors recently shuttered its CAMI assembly plant in Ingersoll, although it expected to reopen at “half capacity” in autumn. Ford and Stellantis have also suspended or delayed EV production in Canada.

Canadian auto parts makers received some relief on May 1 when US President Donald Trump provided a carveout for auto parts compliant with the continental trade pact, also called CUSMA. But the Big Three — Ford, General Motors and Stellantis — have warned the overall tariffs would drive up prices and devastate the deeply-integrated North American sector. 

Ontario’s auto sector directly employs some 100,000 workers and accounts for $36 billion of the total $220.5 billion in provincial exports to the US. Factories operated by Honda, Ford, GM, Stellantis, and Toyota together produced more than 1.5 million cars, pick-ups and SUVs last year. 

EV strategy setback

Ottawa's $100 billion EV strategy has already suffered setbacks as automakers postponed or shelved projects in response to slowing domestic EV demand and battery makers were confronted with lower prices and tighter margins in a competitive global market dominated by Chinese rivals. 

Ontario NDP Leader Marit Stiles said the Ford government has not done enough to help workers and communities left in limbo by the fallout from the trade war. 

“Now they’re left with more uncertainty as shock after shock hits Ontario’s auto sector — but every time we’ve urged action, Premier @fordnation has answered with ‘let’s wait and see,’” Stiles said on the social media platform X.

“That’s not leadership. That’s a risk we can’t afford. It’s time to act,” she said.

The tariff threat to a major sector of Canada’s economy was a key issue in Ford’s recent re-election and the federal campaign which ended the Liberals returning to power last month. 

During the campaign, Liberal Prime Minister Mark Carney proposed a “performance-based” remission framework that would allow automakers that continue to manufacture cars in Canada to import a certain number of US-assembled, CUSMA-compliant vehicles into the country, free of retaliatory tariffs. 

That was in addition to a $2 billion fund unveiled by the Liberals last month to develop an “all-in-Canada” auto supply chain. In 2023, Canada imported $2.3 billion in EVs and plug-in hybrids from China.

(Additional reporting by Abdul Matin Sarfraz in Toronto)