Anxiety over tariffs is putting Toyota and Honda in the same boat. Toyota is building a major battery factory in North Carolina that is expected to have 14 production lines. Four will support batteries for hybrids, and ten will support batteries for EVs. However, Toyota won’t even need all these batteries right away, so who will buy them?
Honda Needs Batteries in Ohio
The answer is that Honda is planning to buy the batteries to put in its cars that are being built in Ohio. Honda is seeking to avoid paying hefty tariffs on parts sourced in China and Japan. That helps Honda, but it also helps Toyota to sell its batteries right away. That means its North Carolina factory will jump into profit right off the bat.
Honda has largely been sourcing batteries from Japan and various other places outside the United States and then shipping them to its US production plants. This rare moment of Toyota vs. Honda has turned into a collaboration born out of necessity due to President Trump’s trade policy. Trump plans to introduce a 25% tariff on auto imports.
Meanwhile, the demand for hybrid vehicles is growing in the United States as many buyers remain wary of EVs but still want something more green and fuel-efficient. Honda sold over 300,000 hybrid vehicles in the US last year, which covers 20% of its total sales.
A Move That Makes Sense
Toyota vs. Honda has been a fierce rivalry for decades. Both automakers were the first on the scene with hybrid models and the original crossovers. The Accord and Camry sedans are often vying for the top spot with buyers. However, the threat of tariffs on imported parts from China and vehicles built in Japan has both automakers collaborating.
Honda doesn’t want to absorb the costs and pass them on to buyers, thus making its hybrid models less viable. Instead, the company is planning to secure 400,000 hybrid battery packs built by Toyota. Production is expected to start in April of this year.
The move makes sense for both Toyota and Honda. Honda wants to expand its hybrid lineup without making cars too expensive and needs a stable battery supply without tariffs. On the other hand, Toyota gets a big customer right away to justify the cost of its battery investment.
Japanese Automakers Seek to Reduce Dependence on China
The deal between Toyota and Honda is indicative of a broader trend of Japanese automakers trying to reduce dependence on China for automotive parts. It’s not known yet which vehicles Honda plans to use the batteries in, but its popular CR-V hybrid is a strong contender. Honda is planning to increase hybrid sales, so a US supplier is extremely important.
The Toyota and Honda deal is not a true alliance in the traditional sense, but the move does help both automakers in significant ways. Honda secures a key supplier to help keep its costs low, and Toyota gets a big customer to kick off its battery plant.
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