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Honda to set up $11 billion electric vehicle, battery plants in Canada

FILE PHOTO: Honda announces plans to build electric vehicles and batteries in Ontario

By Maki Shiraki

TOKYO (Reuters) - Honda Motor plans to invest C$15 billion ($11 billion) in new EV and battery production plants alongside its existing facilities in Ontario, it said on Thursday, the Japanese automaker's largest ever investment in Canada.

The investment, announced by company executives and Canadian Prime Minister Justin Trudeau, signals Honda's expectation for more growth in North American demand for EVs.

Like other Japanese car companies, Honda has been a relative latecomer to EVs, and is now pushing to better compete with fast-moving Chinese rivals.

In Canada, it intends to produce essential EV components through joint ventures with companies such as Asahi Kasei, setting up a production system that covers everything from materials to finished vehicles.

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Operations are targeted to start by 2028, with annual production capacity estimated to be a maximum of 240,000 EVs and 36 gigawatt-hours for batteries.

Although global EV demand has slowed, Honda executive Shinji Aoyama told reporters the supply network would help Honda achieve its goal for all of its North American sales to be either EVs or fuel cell vehicles by 2040.

Honda said it expects to contribute 60%-70% of the total investment, with the rest coming from joint venture partners and Ontario government subsidies.

Support from the federal Canadian government and Ontario could total around C$5 billion, Trudeau's office said. Details of the investment are due to be finalised later this year.

The EV and battery plants will be constructed adjacent to existing four-wheeled vehicle and engine plants and the total workforce will increase by around 1,000 people from 4,200 now, Honda said.

It also announced a plan to work with South Korean steel giant POSCO for the production of battery cathode materials, and with Asahi Kasei to make separators.

By handling everything from material development to vehicle assembly in Ontario - including bringing battery production in house and sourcing locally - Honda expects to reduce costs by more than 20% from current methods.

Canada has wooed companies involved in all parts of the EV supply chain to bolster its manufacturing heartland in Ontario as the world seeks to cut carbon emissions.

"Honda's investment is a vote of confidence in Canada, in Canadian auto workers, and in our manufacturing sector. Together, we're creating good-paying jobs, growing our economy, and keeping our air clean," Trudeau said.

North America accounts for approximately 30% of Honda's global four-wheeled vehicle sales.

Honda is currently overhauling facilities at its U.S. plant in Ohio, with an investment of $700 million, and constructing a battery plant in a joint venture with LG Energy Solution for $4.4 billion.

($1 = 1.3676 Canadian dollars)

(Additional reporting by David Ljunggren in Ottawa; Editing by David Dolan, Mark Potter, Elaine Hardcastle)