Honda Says Plans for a New American Factory Hinge on CUSMA Extension

• The automaker’s eight North American factories are currently close to maximum capacity.

• The company is looking to add a ninth production facility on the continent.

• Uncertainty about U.S. – Canada trade relations could push Honda to change its plans.

While Honda already operates eight vehicle assembly plants in North America (the Alliston, Ontario location is composed of three factories), it is looking to add a ninth to the list.

Indeed, the Japanese automaker said recently that all of its current assembly plants in Canada, the United States, and Mexico are running close to their maximum capacity, which leaves little room to add new products.

Since the company is in the process of developing 15 new hybrid models for North America by 2030, it will need more production capacity to meet the demand, especially if fuel prices remain high.

Nevertheless, Honda’s Executive Vice President, Noriya Kaihara, warned that the automaker might have to change its plans if there isn’t an agreement on CUSMA soon.

Known as USMCA in the United States, this trade deal should allow for the free flow of parts and products across the Mexican, American, and Canadian borders, including automobiles.

Since Donald Trump came back into office in January of 2025, the United States has breached the conditions of CUSMA by imposing tariffs on all sorts of products that are made in both Canada and Mexico.

This has led to significant increases in the production costs of vehicles made everywhere in North America and made it less profitable to sell imported vehicles in the United States.

Of course, this has upended automakers’ production strategies, forcing them to reorganize their plans to limit the impacts of tariffs.

Now that Canada and the United States seemed to be making progress toward a new agreement on CUSMA, the Trump Administration imposed a new round of 50% tariffs on U.S. $20 million worth of goods from Canada after talks failed last week.

This creates another level of uncertainty for automakers and parts manufacturers, leading some of them to modify their plans once again.

Honda will need to make a decision on a new North American assembly plant in the next year or two since it wants the new facility to be operational in 2030.

When the company first said it was considering a new plant, this decision seemed to be related to the location where it would be built. Now, it seems the decision will be whether to build it or not.

If Canada and the United States can’t come to an agreement that would remove tariffs on vehicles and auto parts, Honda could choose to prioritize other markets outside of North America, at least for a few years.

The Japanese automaker is not alone in this situation, as Hyundai said last year that trade ambiguity was delaying over U.S. 20 million in direct investment into the United States.<

Source: Automotive News Canada