Honda to source hybrid batteries from Toyota to circumvent US tariffs, involving 400,000 vehicles

It’s a brave new world, and Honda is making strange bedfellows with its once most bitter rivals. While its off again, on again merger with Nissan is a continuing saga, the company is now tapping into the considerable resources of its arch nemesis Toyota, uniting against a common enemy – looming US tariffs.

According to Nikkei Asia, Honda will take in batteries for around 400,000 US-made hybrid vehicles from Toyota’s American plant, in order to skirt tariffs announced by new president Donald Trump. The company currently sources its batteries from Japan and China, but imports from the latter have been hit with a 20% tax since earlier this month.

Those Toyota-made batteries, likely be headed to the CR-V among other models, should come from a new US$14 billion (RM62 billion) plant in North Carolina – Toyota’s first in-house battery factory outside Japan. The facility will start producing batteries next month.

Honda’s move is part of a wider trend by Japanese carmakers to team up to establish new supply chains, the publication said. It also highlights the importance of more efficient hybrids in the US, amid slowing demand for electric vehicles and Trump’s vow to scrap his predecessor Joe Biden’s initiative to promote EVs.

Sales of hybrid vehicles in the US are expected to more than double last year’s figure to 4.12 million units by 2030, making up a quarter of new car sales according to S&P Global Mobility. Honda alone is propelling the industry near that threshold with 308,000 hybrids sold in 2024 – 22% of the 1.42 million new vehicles sold by all carmakers in the US. The company aims to sell 1.3 million hybrids globally (excluding China) by 2030, 50% more than it did last year.

Its aspirations are butting up against Trump’s nationalist policies. The US imposed a 10% tariff on all Chinese imports on February 4, then slapped an additional 10% the following month. Meanwhile, tariffs on Japanese car imports are expected to be bumped up from 2.5% currently to a massive 25%.

Given that Japan exports 1.3 million cars to the US each year, the planned import tax hike is set to cost the island nation’s six top carmakers (Toyota, Honda, Nissan, Mazda, Mitsubishi and Subaru) an estimated US$20 billion (RM88.6 billion). A wide range of automotive components, including hybrid batteries, could also be levied the higher tariffs.

It’s not just Japanese-built cars that will be affected – a 25% reciprocal tariff on Mexican and Canadian goods could cost Honda around US$4.7 billion (RM20.8 billion) annually. This is forcing the company to shift some production from those countries back to the US, in addition to restructuring its supply chain to minimise the impact on its business.

Courting Honda’s business will certainly help Toyota, subsidising the huge costs associated with the North Carolina plant. The world’s largest carmaker plans to increase the share of electrified models (including hybrids) sold in North America from 40% of its overall car sales in 2024 to 80% by 2030.

The post Honda to source hybrid batteries from Toyota to circumvent US tariffs, involving 400,000 vehicles appeared first on Paul Tan's Automotive News.