Honda’s electric vehicle (EV)expansion plans in Canada appear to be hanging by a thread. According to a report out of Japan from Nikkei Asia, the automaker has halted plans for its previously announced $15 billion Canadian EV and battery project in Ontario, as slowing demand for electric vehicles in the United States forces the company to rethink its strategy.
The project, first announced in 2024, would have seen Honda build a large-scale EV assembly plant and battery facility in Alliston, Ontario, with production originally expected to begin by 2028. At full capacity, the site was expected to produce up to 240,000 vehicles annually and become a cornerstone of Canada’s growing EV manufacturing sector.
Honda then delayed the factory citing a slowdown in EV demand. Now, the automaker has indefinitely suspended the project, and canceling the plant entirely remains a possibility depending on how EV demand and government policies evolve over the next few years.
The move is the latest in a series of pullbacks by several legacy automakers as they become increasingly cautious about the pace of EV adoption in North America.
Honda pivots toward hybrids
Honda’s change in direction comes as hybrids continue to outperform expectations in the U.S. market, while EV growth has slowed. Hybrid vehicles now account for nearly one in five new vehicle sales in the United States, up significantly year-over-year.
At the same time, changes to U.S. policy have made EV investments harder to justify financially. The removal of tax incentives tied to the Inflation Reduction Act, combined with relaxed fuel economy standards, has reduced pressure on automakers to aggressively transition to fully electric lineups.
Instead, Honda is now focusing heavily on hybrid production. The company is expected to lean on its Ohio manufacturing facilities, where it has already invested heavily in flexible production lines capable of building gasoline, hybrid, and EVs side-by-side.
Honda’s EV retreat was already underway
This announcement does not come out of nowhere. Over the last year, Honda has quietly scaled back several EV programs in North America. The automaker recently canceled plans for multiple upcoming electric models, including two vehicles from its highly anticipated 0 Series lineup.
Honda is also preparing to discontinue the Prologue EV in the U.S., its first major EV developed alongside General Motors. Production could reportedly end as early as later this year once existing inventory is sold off. The Acura ZDX EV has already been discontinued.
The company has also cancelled its EV partnership with Sony, Afeela.
Canada caught in the middle
For Canada, Honda’s pause represents another setback for the country’s EV manufacturing ambitions. Federal and provincial governments had aggressively courted automakers with billions in incentives to establish EV supply chains domestically. Honda’s investment was viewed as one of the largest automotive manufacturing commitments in Canadian history.
Whether Honda ultimately revives the project may depend less on Canada and more on whether North America’s EV market regains momentum over the next two years.
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