Honda’s decision to pause its $15-billion electric vehicle investment in Ontario is prompting alarm among industry experts, with some questioning whether Canada’s EV sector is entering a period of serious turbulence.
The project, originally slated to include multiple battery production plants and a domestic supply chain, is now on hold for at least two years, with Honda citing slowing market demand and U.S. tariff pressures as major factors.
“You have to be worried,” said Gal Raz, professor at the Ivey Business School. “What the industry is seeing is U.S. tariffs, and they’re reacting.”
The delay, considered the largest EV project pause in Canadian history, is causing analysts to re-evaluate the prospects of other large-scale EV investments — including ongoing projects by Stellantis and Volkswagen.
EV Sales Slowing, Incentives Disappearing
Raz pointed to the decline in EV sales during early 2025 as part of the broader picture. He notes that a reduction in consumer incentives — particularly federal rebates — has added pressure.
“In Canada, many rebates have been reduced or removed entirely,” said Raz. “Quebec and B.C. have scaled back programs, and Ontario hasn’t had a rebate since 2018. That’s part of why EV sales have dropped from their peak.”
Joly Reassures Industry, Workers
On her first day as Canada’s new Minister of Industry, Mélanie Joly faced intense scrutiny over the struggling EV sector. She told CTV News that she’s already engaged with the CEOs of GM, Ford, and Stellantis, and hopes to meet with each of them by week’s end.
Following Honda’s announcement, Joly issued a statement reassuring Canadians:
“No jobs will be lost. Workers will keep their good-paying jobs and working conditions won’t change,” she said, adding that Honda remains committed to major EV investments in Canada.
NextStar and Volkswagen Projects Press Ahead — For Now
Despite Honda’s pause, Canada’s first large-scale battery plant — NextStar Energy, a joint venture between Stellantis and LG Energy Solution — remains on track in Windsor, Ontario.
“The project is on track to begin cell production later this year,” a NextStar spokesperson confirmed.
Similarly, Volkswagen and PowerCo’s gigafactory in St. Thomas — hailed as North America’s first EV battery cell plant of its kind — is set to begin production in 2027, with commercial scaling based on demand.
However, the batteries produced in Ontario will power vehicles assembled in South Carolina and Tennessee, not Canada.
Tariffs and Political Headwinds Could Shift Investment Plans
Industry watchers warn that U.S. tariffs imposed by President Donald Trump are having ripple effects across North American auto investments. Honda cited tariffs as the main reason for shifting CR-V production to Ohio instead of Canada.
“The Volkswagen board is going to ask: are we still confident in Canada? Should we postpone too?” said Raz, noting some companies may adopt a “wait and see” approach until after the next U.S. presidential term.
Experts say that if Canada is serious about reaching its 100% zero-emission vehicle sales target by 2035, it must invest not only in battery plants but also in supply chain infrastructure and consumer-facing incentives.
“Ottawa and the provinces need to think bigger,” said Raz. “Without bold new consumer programs, the transition to EVs will stall.”
As the EV market enters a new phase of caution and recalibration, industry leaders say continued public investment and smart policy will be critical to keep Canada’s electric vehicle dream alive.