Japan’s Asahi Kasei to invest $1.6-billion in Ontario electric-vehicle facility, sources say

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Honda Motor Co.’s $15-billion investment in Ontario’s electric-vehicle supply chain will extend into the Niagara region, through a partnership with Japan’s Asahi Kasei to build components at a new $1.6-billion plant in Port Colborne, according to two sources with knowledge of the deal.

Asahi Kasei will make the announcement on Tuesday, alongside government officials including Prime Minister Justin Trudeau and Ontario Premier Doug Ford.

A senior government source said that the company will be eligible for federal tax credits worth in the low hundreds of millions of dollars, which will be part of the approximately $2.5-billion in federal subsidies announced for Honda’s EV-making plans in Ontario. It will also receive financial support from Mr. Ford’s provincial government, which is offering up to $2.5-billion for the series of Honda investments. The Globe and Mail is not naming the sources because they are not authorized to speak publicly about the deal.

In a statement on its website, Asahi Kasei says its plant is to be established in October, 2024, and will also receive funding from the Development Bank of Japan Inc.

Touted by the federal and provincial governments as the largest single investment in the history of Canada’s auto sector, the projects planned by Honda and its partners – which will make Ontario the epicentre of the automaker’s rollout of EVs across North America – add up to an unusually sweeping package.

Whereas other companies such as Stellantis NV, Volkswagen Group and Ford Motor Co. have announced major individual investments in assembling EV batteries or the vehicles themselves, Honda’s plans go further across the supply chain.

They include a new battery factory and vehicle-assembly plant, scheduled to open in 2028 and eventually have the capacity to build 240,000 vehicles annually, at Honda’s existing auto-manufacturing site in Alliston, Ont. They also include the battery-components projects with Asahi Kasei in Port Colborne and with South Korea’s Posco Future M Co. Ltd.

Asahi Kasei will make separators, which are made of polymeric materials and go between EV batteries’ anodes and cathodes. Posco will produce cathodes, at a yet-to-be-specified location in the province.

The rollout of the investments is part of the effort by Canadian governments to demonstrate that the country can be a major international player in the fast-developing EV sector.

Honda’s projects have helped bolster that case, not just because of their size and scope, but also because the governments are not subsidizing them to the same extent as previously announced battery-making investments by other automakers. While Honda’s $15-billion plans are projected to receive approximately $5-billion in total federal and provincial backing, smaller battery-making commitments by Volkswagen and Stellantis could receive more than double that total, because Canada had to match enormous subsidies on offer in the United States through President Joe Biden’s Inflation Reduction Act.

Honda’s president and chief executive officer, Toshihiro Mibe, told The Globe last month that beyond subsidies, his company was drawn to Canada by the country’s access to battery minerals, its relatively clean electricity supply and its skilled labour force.

The investments, by Honda HMC-N as well as other automakers, are also touted by governments as bringing new economic opportunities to parts of Ontario that have previously struggled economically.

That includes the Niagara region, which for decades suffered from a decline of traditional manufacturing – including within the auto sector – that led to high unemployment rates.

The region has recently seen some other significant investment in the industrial shift toward electric vehicles. The Canadian auto-parts giant Linamar Corp. is building Canada’s first gigacasting factory – capable of making large chunks of EVs’ frames in one piece – in Welland, which neighbours Port Colborne. And General Motors Co. announced earlier this year that it plans to begin making EV drive units at its long-standing engine and transmission plant in the larger city of St. Catharines.

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Asked Monday about federal support for the new Asahi Kasei plant in Port Colborne, Deputy Prime Minister and Finance Minister Chrystia Freeland said the Honda deal is proof that Ottawa’s economic plan for the next generation of EVs is working. She said the federal government’s support for Honda’s $15-billion investment is through investment tax credits, including a new EV supply chain investment credit. She did not answer when asked how many jobs it would create.

“We can take advantage of the fact that we have the natural resources, we know how to process them, we know how to turn them into batteries and cars. And what we want to see is more and more companies taking advantage of that full supply chain,” she said at a child-care announcement in southwestern Ontario, adding that she’s hopeful all parties will pass two budget bills that contain the new tax credits into law by the end of summer.