Canada targets Honda, Toyota with EV tax incentive
Prime Minister Justin Trudeau is offering more tax breaks to automotive firms to put their electric vehicle factories in Canada, as companies including Honda Motor Co. Ltd. and Toyota Motor Corp. consider lucrative new investments.
Ottawa's federal budget, released on Tuesday, unveiled a new 10 per cent tax credit on the capital cost of buildings used for EV manufacturing — but only if companies make a significant bet on locating other portions of their supply chains within Canada.
That tax credit, projected to cost $1 billion by 2035, can be stacked on top of a 30 per cent tax credit for the equipment costs of EV manufacturers, a measure announced last year.
The budget document said the tax credit is meant to encourage companies to “choose Canada for more than one stage in the manufacturing process,” which would create more jobs and “help cement Canada's position as a leader in this sector.”
The new tax incentive underscores a shift in the government strategy as it tries to keep pace with the U.S. as a destination for manufacturers. Last year, Volkswagen AG, Stellantis NV and Northvolt AB all received massive production-subsidy packages in exchange for building their battery assembly plants in Canada.
But when it comes to Honda, which is considering a multibillion dollar EV project, the government is not offering another production subsidy deal, according to people familiar with matter. Instead, the government is hoping that the tax credits will be enough to land the investment.
Finance Minister Chrystia Freeland's budget also introduces other programs meant to boost investment in energy and natural resources projects.
The government is aiming to speed up the permitting of natural resource projects, particularly those in the critical minerals sector.