Honda cancels electric car factory in Canada, cuts e-SUV

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Honda will remove the Prologue electric SUV, developed jointly with General Motors, from its lineup. It has been sold in North America since 2024 and is largely based on the Chevrolet Blazer EV. Instead, Honda will focus on hybrid cars in North America going forward. In parallel, the Japanese company is halting preparations for the construction of a factory for electric cars and batteries in Canada.

This is reported by Nikkei Asia. Honda has not commented on this. In early 2024, the automotive group announced the construction of a new electric car plant in Canada, including an attached battery production facility. 18.4 billion Canadian dollars were to be invested (currently around 11.6 billion euros), of which five billion were to come from subsidies from Canada and the province of Ontario. A year ago, Honda postponed the project by two years. The reason was the low demand for electric cars in North America.

This was the heyday of such announcements for the energy transition in passenger cars. From 2035, Canada, like California, wanted to allow only locally emission-free drives for passenger cars and light commercial vehicles. Stellantis, Northvolt, and Volkswagen alone intended to invest around 38 billion Canadian dollars in e-production in the monarchy within a decade. These plans have largely fallen apart.

Cancelled E-Projects

Northvolt went bankrupt, and construction work in Quebec had to be stopped last year. Volkswagen is at least currently building a battery factory in Ontario, but production volumes are likely to be lower than originally planned. The electric car VW ID.4 will disappear from the North American market, and production has already ceased. The ID.4 factory in Tennessee will instead produce the gasoline-powered Atlas SUV because VW makes more money with it. GM has abandoned its electric delivery van Brightdrop, and the plant in Canada is idle.

Stellantis is in crisis anyway and sold its stake in a battery factory in the border city of Windsor to its original partner LG Energy Solution in February. Furthermore, the Canadian state is demanding hundreds of millions of dollars back because Stellantis took subsidies but still relocated vehicle production to the USA. Most recently, Stellantis wanted to repurpose a Canadian car factory for the production of Chinese electric cars. This is not met with political favor in Canada.

Gradual Entry of the Chinese

Because the Chinese are supposed to build their own, entirely new e-car factories in Canada, if you please. This is the goal of an agreement between Canada and the People's Republic. Two years ago, the then US administration under Joe Biden introduced a 100 percent tariff on electric vehicles manufactured in China in the trade war with China, which Canada adopted. But now the US administration under Donald Trump is also imposing tariffs on Canada.

At the beginning of the year, Ottawa therefore agreed with Beijing to allow 49,000 Chinese electric cars into the country this year at the lowest tariff rate of 6.1 percent. In return, Beijing is lowering tariffs on certain imports from Canada. 49,000 vehicles are not many, less than three percent of the Canadian car market. But it is a start, inviting Chinese manufacturers to build their own sales networks. Current job advertisements indicate that this strategy is working.

By 2030, the quota will increase to 70,000 Chinese e-vehicles per year. They are to be affordable; at least half should then have an import value of less than 35,000 Canadian dollars (just under 22,000 euros). The tariff is intentionally not being abolished because Chinese manufacturers who find favor in Canada are expected to produce locally in the long term and invest money in it. The conversion of a subsidized Stellantis factory does not fit into this plan.