Honda Hybrids Might Get Toyota Batteries as a Result of Tariffs

As it mulls the pros and cons of a merger with Nissan, Honda has reportedly looked at cutting a deal with Toyota to avoid the American government’s import tariffs. The brand will buy a big batch of hybrid batteries from its rival’s North Carolina plant instead of shipping them from abroad, according to a recent report.

Without citing sources, Japanese newspaper Nikkei (usually dead-on when it comes to Japanese-brand business news) wrote that Toyota has agreed to provide Honda with 400,000 battery packs starting in fiscal year 2025, which begins in April. Coincidentally, or not, that’s also when the new, $14 billion plant that Toyota is building in North Carolina is scheduled to start making batteries. It sounds like the deal is pretty straightforward: Toyota will build the batteries and Honda will buy them. It’s not an alliance, and Toyota isn’t buying anything from Honda in return. Keep in mind that nothing is official yet, however.

Buying 400,000 batteries with a “made in the United States” label should cover Honda’s annual American hybrid sales. The company sold about 308,000 hybrids in the United States last year according to a press release, and it plans to significantly increase that figure in the coming years. It’s too early to tell which models will get Toyota-built batteries, but the publication speculates that the popular CR-V is near the top of the list.

As it stands, the batteries fitted to Honda’s hybrids come from Japan or China, but that’s no longer economically feasible. On March 4, the American government announced a 10% tariff on anything that’s imported from China; It’s added to a 10% tariff announced the previous month. Nikkei reports that the White House is expected to raise tariffs on auto imports from Japan from 2.5% to 25% in the near future.

Whether or not this becomes a long-term solution remains to be seen. In the short term, such an arrangement would let Honda avoid tariffs related to hybrid batteries. Its alternatives are absorbing the tariffs, which would reduce profits, or passing them on to customers, which would make cars more expensive and reduce sales. Setting up a battery plant in the United States would require a tremendous amount of time and money. For its part, Toyota will see a quicker return on its significant investment.

We’ve reached out to both companies for confirmation. Honda declined to comment; We haven’t heard back from Toyota yet.

Honda and Toyota aren’t the only carmakers that have rejigged their supply chain to avoid tariffs. Porsche and Audi are open to building cars in the United States, according to a recent report. In June 2024, Volvo delayed the EX30 to avoid paying a 100% tariff on Chinese EVs.

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