Honda's conditional plant plans
Honda Motor is weighing whether to add a new assembly plant in North America, but a senior executive says a decision depends on the fate of the US-Mexico-Canada Agreement (USMCA). Honda Executive Vice President Noriya Kaihara told reporters at a roundtable in Washington that the automaker is close to full production capacity in the region and needs another factory.
"If there is no USMCA agreement in the future, we may have to change our direction," Kaihara said, adding that the company would need to decide within a year or two and would like the plant operational around 2030. The New York Post reported his remarks.
Meanwhile, The New York Times reported separately that Honda is considering building a new plant in the U.S. as part of plans to expand its hybrid lineup from 2030, citing a senior executive. The two reports overlap but differ in scope: The New York Times described the plant as possibly in the U.S. and tied it to the hybrid strategy, while the New York Post emphasized the conditional nature tied to the USMCA.
Hybrid pivot and EV scale-backs
Honda's potential new factory comes amid a broader strategic shift. The company has been reducing its electric-vehicle commitments. In May, Honda scrapped its long-term EV sales target, including a goal of having EVs account for a fifth of its new car sales in 2030. It also indefinitely suspended a planned $11 billion EV and battery production project in Canada and canceled three planned EV models for the U.S. market.
Instead, Honda plans to introduce 15 new hybrid models by March 2030, primarily targeting North American buyers. As The Japan Times reports, the move follows Honda's cancellation of a trio of battery-electric models for the U.S. and reflects a priority on hybrid and traditional internal combustion engine vehicles. Honda's latest hybrids have sold well with American buyers mindful of gas prices.
The strategic shift has been costly. Honda posted its first annual loss since its founding in 1948, a result of the strategy change, according to The Japan Times.
Trade tariffs and industry concerns
The uncertainty around USMCA is not Honda's alone. The Trump administration is negotiating with Canada and Mexico over the trade deal's future. The U.S. has imposed 50% tariffs on $20 billion of Canadian products, and Canada announced it would retaliate effective Sept. 8.
Kaihara said Honda currently is not passing on the costs of tariffs to North American buyers. But the trade climate has already affected other automakers. Hyundai Motor told the administration last year that USMCA uncertainty was delaying its investment decisions. "Early confirmation of USMCA's extension would immediately unlock over $20 billion in new American investments," Hyundai said in November, adding that "every month of ambiguity slows job creation, site selection and technology development."
Trade pressures come at a time of strong demand for Honda's fuel-efficient models. With oil prices staying high since the start of the US war with Iran, interest in Honda's hybrids and other fuel-efficient vehicles has surged, giving the company its best July in seven years, with car sales up 36%, according to The New York Post.
Future outlook
Honda's decision on the new plant will come within the next few years, with construction likely by around 2030 if the go-ahead is given. The outcome depends on whether USMCA is extended, a matter that the company sees as pivotal. In the meantime, Honda continues its regional production adjustments, such as shifting production of its U.S.-bound five-door Civic hybrid from Japan to Indiana last year.
The company's recent cancellations and suspension of EV projects illustrate how trade and policy uncertainties are shaping investment choices for automakers in North America.