Listen to the article 7 min This audio is auto-generated. Please let us know if you have feedback. On May 14, Honda Canada announced that it’s putting its plans for a CA$15 billion (around $10.8 billion) electric vehicle (EV) and battery plant in Alliston, Ontario on hold indefinitely. This has raised concerns among analysts and policymakers about whether Canada’s investment of over CA$52 billion in government subsidies for the EV industry will actually pay off. The federal, Ontario, and Québec governments have provided these subsidies to companies that committed to setting up plants for batteries, battery components, and related materials, especially during the years 2023 and 2024, according to the Office of the Parliamentary Budget Officer in Ottawa. However, the companies receiving these funds haven’t yet built the complete supply chain needed for EV production-from raw materials to finished vehicles-that government officials had hoped for. Here are some examples: Stellantis announced in February 2026 that it was divesting its stake in the CA$5 billion Next Star Energy battery plant located in Windsor, Ontario. This was part of a $26 billion write-down related to EV investments. In September 2025, the Québec government canceled a contract with Sweden’s Northvolt which halted plans for a CA$7 billion EV battery facility near Montréal after Northvolt filed for bankruptcy. Honda stated that its indefinite pause on the “Canadian value chain investment project” in Alliston is due to “evolving business conditions, a change in external resource strategy and shifting customer demand,” describing this pause as “appropriate at this stage.”
A Policy Misstep or Smart Move for Future Growth?
Economic experts are expressing doubts about Canada’s industrial policy considering these changes in investment. An analysis from the Organization for Economic Co-operation and Development released in March 2026 indicated that scaling up battery production and broader EV manufacturing faces more significant challenges than alternatives like biogas or carbon-capture-and-storage technology. It also noted that Canada’s share of global exports of EVs and batteries is less than its overall export share. The OECD pointed out that while Canada possesses untapped reserves of critical minerals along with a strong automotive sector, there are considerable hurdles posed by technological advancement and market competition. “Its success, far from certain, will require a sustained strategic industrial policy approach and substantial investment at each step of development,” warned the OECD. A report from Ottawa-based think tank Macdonald-Laurier Institute in September 2025 cautioned against failing to establish a sustainable domestic market for EVs-contrasting Canada’s situation with Norway’s successful model-pointing out that subsidies lack local market backing. “Canada’s EV strategy risks becoming a case study in how not to do industrial policy,” it remarked. S& P Global highlighted issues such as range anxiety, insufficient charging stations, and costs reducing sales within Canada. After purchase incentives were paused by federal and provincial governments in 2025, sales dropped significantly from 18.3% to just 8.7% of new car registrations compared to Norway’s remarkable rate of 95.9% during that same year. Nonetheless, Vic Fedeli, Ontario’s Minister of Economic Development, Job Creation and Trade spoke with Wards Auto emphasizing that an end-to-end supply chain-from critical minerals to final EV products-is being established even if current demand hasn’t reached previous explosive growth levels. Fedeli mentioned Norway’s Vianode is investing CA$3.2 billion into building a synthetic graphite production facility in St. Thomas, Ontario which includes a CA$670 million loan from the provincial government. Meanwhile construction progresses at Volkswagen Group’s Power Co battery plant also located in St. Thomas aiming for potential annual output reaching one million batteries. “It’s a massive active construction site,” Fedeli noted. Addtionally Asahi Kasei continues work on their CA$1.56-billion battery separator plant partnered with Honda situated in Port Colborne while offering support through Ontario’s CA$500 million Critical Minerals Processing Fund aimed at processors working with lithium, cobalt, nickel, and other essential battery minerals emphasized Fedeli.Will There Be Enough Demand For The Supply Chain?
Brian Kingston who leads Canadian Vehicle Manufacturers’ Association representing Ford Motor Company of Canada , General Motors , and Stellantis said enhancing recharging infrastructure would be key to boosting demand alongside improving user experience. “Charging takes more time so you need charging spots near services instead of just parking lots next door big-box stores,” Kingston explained.”That’s not much fun when it’s minus twenty outside.” Kingston appreciated how Ontario has been looking into adding charging points at ONroute plazas along highways as well as commending federal efforts towards establishing national networks supported by an investment worth CA$1.5 billion through Canada Infrastructure Bank. If those developments take shape along with competitive pricing compared gas , demand might pick up. But presently Kingston assessed “mass adoption isn’t on horizon.” However hybrid sales continue rising across Canada showing non-plug-in hybrid vehicle growth rose by sixty-one thousand units between twenty-four & twenty-five versus thirty-three thousand additional units from twenty-three & twenty-four respectively. “Hybrids,” said Fedeli ,”will play crucial role stimulating Canadian need auto batteries manufactured locally offering consumers reluctant full-EV options some comfort concerning range/recharging.”The recently retired president/CEO David Adams asserted preparations done where battery manufacturing/supply projects stalled weren’t wasted efforts.“If you’ve got construction underway all approvals sorted plus contractors/suppliers prepped ready , it’s simpler than starting anew.”
This applies especially when like LG their plants may produce stationary energy storage systems.
Beyond this Adams stressed upstream critical mineral ventures keep progressing such as Mangrove Lithium opening commercial electrochemical lithium refining site Delta, British Columbia backed by promised federal funding amounting up-to $21 million.
NeverthelessAdams insisted solid North American Electric Vehicle marketplace must underpin supply chain initiatives highlighting costs involved exporting heavy chemically volatile batteries overseas.
Consideringimportance US Market Canadian Batteries/materials “about face turn” Trump administration regarding Electric Vehicle subsidies/tax breaks coupled soft American appetite presents difficulties manufacturers pursuing major investments throughout entire ecosystem he added.
Despitechallenges stemming tariffs cutbacks consumer incentives having weakened markets Kingston remains “optimistic” regarding prospects whole heartedly embracing complete vertical integration evident past successes indicates promising future awaiting ahead admitting execution take longer than anticipated.
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