Japanese automaker Honda has indefinitely postponed its plans to build an electric vehicle (EV) factory in Canada due to slowing demand in the U.S., the Nihon Keizai Shimbun reported on Wednesday.
According to the Nikkei, Honda will halt construction of its planned EV and battery plants in Ontario, Canada. The company recently decided to suspend the project and has entered into discussions with the Canadian government.
Honda had initially announced plans for the Canadian factory in April 2024, aiming to start operations around 2028.
The EV plant was expected to have an annual production capacity of 240,000 units, with a total investment of 15 billion CAD (about 11 billion USD) including the battery plant. Land acquisition was completed, and the Canadian government had committed funding support.
However, as the EV market failed to grow as anticipated, Honda had already pushed back the start date by about two years to May 2025. The Nikkei reports that Honda is now considering scrapping the plans entirely.
In 2022, during the Biden administration, the U.S. enacted the Inflation Reduction Act (IRA) to provide tax credits for EV purchases and boost EV adoption.
These tax credits were later abolished in September 2025 by the Donald Trump administration, causing the price of Tesla’s flagship vehicles to rise by about 20%.
That December, the average fuel efficiency targets for automakers in the U.S. were lowered, and manufacturers no longer faced penalties for selling high-emission vehicles, reducing the incentive to produce more EVs, according to the Nikkei’s analysis.
In fact, U.S. EV sales plummeted by 36% year-over-year in the last quarter of 2025. In contrast, hybrid electric vehicle (HEV) sales surged by 11% to a record 19% market share during the same period.
Delays in trade negotiations between the U.S. and Canada have further increased uncertainty, likely contributing to Honda’s decision to suspend its plans.
Consequently, Honda plans to scale back its EV-related investments, originally set at 7 trillion JPY (about 44.7 billion USD), and refocus its North American strategy on the more popular HEVs.
Honda will end production of the Prologue EV, co-developed with General Motors, in the second half of 2026 and cease sales once inventory is depleted. This move will temporarily leave Honda without an EV offering in its U.S. lineup.
Honda had already halted production of its luxury Acura brand’s ZDX EV in 2025. In March, the company decided to discontinue development of three models, including the flagship Zero Series EV planned for North American sales. Related losses are estimated to reach up to 2.5 trillion JPY (about 16 billion USD).
Additionally, Honda plans to repurpose its joint venture EV battery plant with LG Energy Solution in Ohio for HEV and energy storage system (ESS) applications.
