Honda Suspension of EV Project Marks Latest Setback for Canada's Struggling Auto Sector

By Paul Vieira

OTTAWA--Honda Motor said Thursday it has shelved its plan for a $11 billion electric-vehicle supply-chain project in Canada, citing a change in strategy from the Japan-based auto maker.

The decision represents another blow to Canada's auto sector, which is under severe strain from President Trump's 25% tariff on foreign-made cars. Some automakers based in Canada have either scaled back production or moved manufacturing to the U.S. Bets made earlier this decade on an upswing in EV demand and global decarbonization policies have backfired.

Canadian Prime Minister Mark Carney is seeking tariff relief on automobiles and other industrial goods as part of a trade deal with Washington that includes a renewal of the existing U.S.-Mexico-Canada trade treaty, or USMCA. Trump has said the U.S. doesn't need cars made in Canada.

A year ago, Honda it would postpone the EV project for two years. Canadian officials at that time were confident the project would eventually be built.

On Thursday, Honda said it has kiboshed the project, due to evolving business conditions, shifting consumer demand and a change in the car maker's strategy. An indefinite suspension "is appropriate at this stage," Honda said. "We will continue reviewing our future procurement and business strategies, while carefully monitoring market conditions."

The Nikkei Asia news agency reported last week that the project would be shelved.

The Canadian government, along with the province of Ontario, had pledged up to 5 billion Canadian dollars, or the equivalent $3.65 billion, to Honda as part of financing project tied to EV production. Honda said Thursday it had not accessed any of the funding.

Under former Prime Minister Justin Trudeau, Canada and its provinces offered support of roughly C$52 billion to attract investment from automakers in plants to build EVs and EV components, betting that Canada could benefit from the decarbonization of the transportation sector. At the time, Canadian-made autos entered the U.S. duty free.

But sagging demand for EVs and Trump's trade policy has upended matters.

"Washington's focus on reviving domestic production threatens to rip up decades-old Montreal-to-Detroit supply chains," according to economists at Royal Bank of Canada, in a report this week about Canada's auto sector. It said that in its most pessimistic scenario, auto assembly plants in Canada could shutter by 2040.

Ford Motor abandoned its EV plans at a factory near Toronto and instead, opted two years ago to boost output of its popular F-series pickup trucks. Canada last week disclosed it gave Ford nearly C$500 million to refurbish its plant to accommodate higher production of its super-duty trucks.

Meanwhile, Canada and Stellantis are in talks to resolve a legal dispute focused on Stellantis's decision to shift production of the Jeep Compass from a Canadian plant to Illinois. Earlier this decade, Canada provided the equivalent of just over C$1 billion to the automaker to reconfigure the Brampton plant and maintain production in Canada.

Write to Paul Vieira at paul.vieira@wsj.com

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May 14, 2026 09:12 ET (13:12 GMT)