By Paul Vieira and Robb Stewart

OTTAWA--Honda Motor said it is postponing by about two years an $11 billion electric-vehicle manufacturing project in Canada, citing weaker-than-expected EV sales.

"Honda will announce the specific timing of the resumption of the project once it has been finalized, while keeping a close eye on further market demands," the company said in a statement. Honda Chief Executive Toshihiro Mibe had told investors earlier Tuesday that the automaker would present more details on May 20 about changes to its EV strategy.

Postponing the Canadian EV project is part of the automaker's effort to contain the damage from hefty U.S. tariffs on foreign-made vehicles. Honda said it expects its net profit to drop 70% to 250 billion yen, equivalent to $1.68 billion, for the year ending March 2026.

Demand for electric cars remains soft in many major markets as customers have been slow to make the switch away from traditional gas-engine models. Carmakers around the world have been delaying EV development plans despite investing billions of dollars in electric technology in recent years, encouraged by tailpipe emissions regulations designed to drive sales of battery-powered models. Sales of EVs in the U.S. fell by about 5% during April, according to estimates from the research firm Motor Intelligence, while the broader car market grew by 10%.

For Canada, this represents a double blow. Canada's auto sector is reeling from President Trump's 25% tariff on foreign-made cars, with General Motors and Stellantis taking steps to scale back production. Meanwhile, the former Canadian prime minister, Justin Trudeau, bet heavily on luring automakers and manfacuters with EV ambitions to the country with tens of billions in financing and tax credits. One of those manufacturers, Swedish battery maker Northvolt, has filed for bankruptcy, and its planned factory in Quebec is also facing a sizable delay.

"Canada's automotive and EV manufacturing strategy, touted as a generational opportunity to drive economic growth, jobs and environmental leadership, has failed quickly and dramatically," Jim Hinton, an intellectual-property lawyer in Ottawa, said in an essay published in The Globe and Mail newspaper.

It was about 13 months ago when Honda unveiled its plan for the Canada EV project, about 70 miles northwest of Toronto. At the time, Honda said it expected EV production in Canada to begin in 2028, with eventual capacity of 240,000 vehicles a year and 36 gigawatt-hours of EV batteries.

Federal and regional authorities in Canada helped secure the Honda deal by collectively offering roughly $3.6 billion in tax credits.

Write to Paul Vieira at paul.vieira@wsj.com

(END) Dow Jones Newswires

May 13, 2025 10:04 ET (14:04 GMT)

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