Honda said it will postpone its $15-billion expansion in Canada by two years, telling shareholders in an open letter it will restart the massive project only with a “close eye on further market demands.” 

Honda Canada spokesperson Ken Chiu said the decision has no impact on current production or employment levels at the company’s manufacturing facility in Alliston, Ont., which employs about 4,200 people.

Still, the pullback is the most dramatic in a series of setbacks that have undermined Canadian plans to build one of the world’s leading EV and battery ecosystems. The Honda project is backed by about $5 billion in federal and provincial subsidies, and was expected to create at least 1,000 jobs when it was finished in 2028. 

Since Honda first announced it in 2024, its business has changed drastically, and it now expects net profit to fall nearly 70 per cent in the next fiscal year. In an earnings release on Tuesday, Honda said it expects that U.S. tariffs, including those affecting Canada, will cost it about 650 billion yen, or about $6.2 billion, by the end of next March. A plan to boost its business by merging with Nissan crumbled, while key incentive programs for EVs in the U.S. and Canada are winding down, further dampening demand. 

The Japanese automaker was among the largest foreign direct investors in Canada’s auto industry, with its $15-billion EV investment worth more than the two next-biggest, Northvolt and Volkswagen, combined. Companies like Ford and General Motors, as well as suppliers like Northvolt, EcoPro and Umicore, have also slowed their EV plans in Canada, while homegrown companies like Li-Cycle and Lion Electric have struggled to stay afloat. The Canadian auto industry had high hopes that Japanese companies like Honda would stay the course. 

Ontario Premier Doug Ford said Tuesday that Honda has assured him it will keep making vehicles in the province and continue to expand. At a press conference, Ford also said he is “very confident” that Canada will reach a trade deal with the U.S. that will prevent tariffs from setting back other EV projects, like large new battery plants planned by Volkswagen and NextStar Energy, a joint venture of LG and Stellantis. 

“We’re going to make sure that they’re held accountable and they continue manufacturing automobiles,” Ford said of the auto companies. 

None of the $2.5 billion in promised provincial subsidies have been released to Honda to date for its expansion in Alliston, according to Ontario economic development minister Vic Fedeli’s office. 

The Honda Canada plant, which has operated in the community about 100 kilometres northwest of Toronto since the 1980s, will remain central to Honda’s future. The company said in its earnings release on Tuesday that hybrids like the ones it makes in Alliston are expected to improve its North American profitability, despite an otherwise grim economic outlook. Asahi Kasei, a major Honda supplier, said this week it is continuing to build a battery-part plant it started in Port Colborne, Ont. 

Honda said it plans to announce a “trajectory change” for its EV strategy on May 20.