Honda Is One Step Closer To Qualifying For New US EV Tax Credits

Aug. 29, 2022 8:55 AM ET by Sebastian Cenizo Electric Vehicles / Comments

The Japanese automaker's EVs will have batteries produced in the USA.

Thanks to the passing of the Inflation Reduction Act, foreign automakers who do not have production facilities in the US are scrambling to get up and running on American soil so that their EVs qualify for tax credits. Hyundai has recently accelerated its plans for a US-based plant, and now Honda has announced that it has made a multi-billion dollar investment in a facility that will produce batteries for its future EVs. In the interim, it will use GM's Ultium platform for its new EVs, and thereafter, the benefits of this new investment will bear fruit. At present, Honda doesn't sell any EVs in the US, not even those produced abroad.

Honda won't be footing the bill for the new factory alone. The plant will be constructed under the name of a new company that will be formed with the support of Honda and LG Energy Solution. In total, the pair will invest $4.4 billion to establish the new plant, with the end goal of an annual production capacity of 40 gigawatt-hours. The pouch-type batteries produced here will be supplied exclusively to Honda and Acura.

The details should be ironed out by the end of this year. Honda is yet to finalize the location for the joint venture plant, but construction is scheduled to begin early next year so that the mass production of these advanced lithium-ion battery cells can begin by the end of 2025.

"Honda is working toward our target to realize carbon neutrality for all products and corporate activities the company is involved in by 2050," said Toshihiro Mibe, Honda's president and CEO. "Aligned with our longstanding commitment to build products close to the customer, Honda is committed to the local procurement of EV batteries which is a critical component of EVs. This initiative in the U.S. with LGES, the leading global battery manufacturer, will be part of such a Honda approach."

Honda notes that the EV market in the US is growing, which is probably why the Prologue will be its first EV. The Prologue is an SUV expected to be similar in overall size to the Honda CR-V.

At present, the list of electric vehicles that qualify for the Inflation Reduction Act's tax credits is very small, but Honda could change that. The automaker is working on new EVs in collaboration with Sony and will develop other, more attainable electric vehicles too. The goal set in June last year was for Honda to be all-electric by 2040, but considering how quickly competitors are making the transition, it's quite possible that this new investment is just the start of a more aggressive electrification strategy that will see the brand introduce more EVs sooner. After all, many of its rivals will be all-electric five years sooner. Either way, this new battery plant is sure to give the brand a big boost.

Honda Is One Step Closer To Qualifying For New US EV Tax Credits

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Honda Is One Step Closer To Qualifying For New US EV Tax Credits

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