HONDA Motor will spend C$15 billion (S$14.9 billion) to build out its electric-vehicle supply chain in Canada, with billions of US dollars of financial aid from government, as the Japanese automaker seeks to tap long-term demand in the region.

The figure includes investment by joint venture partners, and the aim is to start producing EVs in 2028, Honda said.

The company will manufacture 240,000 vehicles a year at the facility, while a standalone battery plant in Alliston, Ontario – a town that’s a little more than an hour’s drive north of Toronto where it currently produces petrol-powered Honda CR-V and Civic models. The battery plant will have a capacity of 36 gigawatt hours.

The push to develop the battery supply chain will also see Honda begin talks with South Korea’s Posco Future M for a cathode materials facility, and it plans to partner with Japan’s Asahi Kase on separator production.

Bloomberg News reported details of Honda’s plan earlier on Thursday.

For Honda, it’s part of a long-term bet on consumer demand for electric vehicles in North America and pushes it towards its goal of having electrified cars account for 100 per cent of sales by 2040. The company already makes hybrid cars in the US and has said it plans to start manufacturing its first US-made fully electric vehicles in Marysville, Ohio next year.

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Honda’s new investments are also set to wean its reliance on external manufacturers for batteries and brings it closer to the raw materials crucial to the clean-energy transition.

“We want to use Canada’s rich resources and energy to be able to establish an EV-focused value chain,” Executive vice-president Shinji Aoyoma said at the company’s headquarters in Tokyo on Thursday. Honda expects it can cut its battery-making costs 20 per cent by producing them on its own, he said.

The investment is a major milestone for Prime Minister Justin Trudeau and Ontario Premier Doug Ford in their quest to secure a share of the North American auto business for Canada as the industry retools towards EVs. The two politicians have already pledged tens of billions of US dollars to convince other manufacturers, including Volkswagen, to build huge EV battery plants in the country.

The company will be able to access investment tax credits from the government of Canada, as well as direct and indirect incentives provided by the province of Ontario. The total package of government help may be worth as much as C$5 billion.

The subsidies are structured differently from the ones Canada promised last year to Volkswagen, Stellantis and Sweden’s Northvolt. Those companies received contracts that will pay a portion of the cost of each battery produced in their Canadian plants – in effect matching the money that’s available to EV battery makers under the US Inflation Reduction Act.

Honda was not offered a production subsidy, government officials have told Bloomberg. Trudeau has repeatedly said Canada can only afford to go so far in matching US manufacturing incentives. BLOOMBERG