Honda to source hybrid vehicle batteries from Toyota’s new US plant as tariff threats and shifting EV policies force Japanese carmakers to rethink their supply chains

Honda Motor is set to procure hybrid vehicle batteries from Toyota’s forthcoming battery factory in the United States, as Japan’s automakers respond to shifting trade winds and policy reversals under former President Donald Trump’s renewed leadership. From fiscal year 2025, Honda will begin sourcing batteries from Toyota’s $14 billion facility in North Carolina, sufficient for around 400,000 hybrid vehicles, covering its entire US hybrid vehicle portfolio.

The shift will end Honda’s current reliance on Japanese and Chinese suppliers for batteries used in its US-assembled hybrid models. The decision marks a significant turning point in Japanese automakers’ strategy, which has long relied on intercontinental supply chains. “Honda’s move is part of a wider effort by Japanese automakers to join forces in establishing new supply chains,” according to Nikkei.

The geopolitical trigger lies in a rising tide of trade protectionism. In March, the US imposed an additional 10% tariff on Chinese imports, supplementing the 10% levy introduced the previous month. A further escalation looms. Trump is expected to raise tariffs on Japanese auto imports to 25%, up from the current 2.5%.

“[Honda] estimates that reciprocal tariffs of 25% on goods from Mexico and Canada would cost it an additional $4.7 billion annually”

Such measures could have severe financial consequences. Japan exports roughly 1.3 million vehicles to the US annually, and the increased duties are forecast to cost the American subsidiaries of six major Japanese automakers some $20 billion in additional levies. Hybrids are not exempt. A broad range of components, including batteries, is likely to face higher tariffs.

Honda has already started to recalculate. The company estimates that reciprocal tariffs of 25% on goods from Mexico and Canada would cost it an additional $4.7 billion annually. In response, Honda is preparing to shift some production from its Mexican and Canadian operations into the US, reconfiguring its supply network to mitigate financial exposure.

Meanwhile, changes in US federal policy are altering the strategic calculus. The Trump administration has pledged to dismantle President Joe Biden’s flagship incentives for electric vehicles. As the policy pendulum swings, demand for hybrid vehicles—less emissions-intensive than petrol cars but free from the charging limitations of battery-electrics—has surged.

Read more Toyota & Honda stories

• Honda cuts China ICE production by 50% as EVs gain momentum
• Honda upgrades production with advanced processes for 2026 Passport models
• Toyota and BMW collaborate on powertrains for hydrogen FCEVs
• How the EV shift sparked integrated Design For Manufacture (DFM)

According to S&P Global Mobility, US hybrid sales are projected to reach 4.12 million units by 2030, more than double 2024 volumes, and a full quarter of total light vehicle sales. Hybrid production, long a strength of Japanese brands, is fast becoming the centrepiece of their North American strategy.

In 2024, Honda sold 308,000 hybrid vehicles in the US, accounting for 22% of its 1.42 million vehicles sold in the country. The company now aims to grow global hybrid sales, excluding China, by 50% from 2024 levels to 1.3 million units by the end of the decade. The batteries sourced from Toyota’s plant are likely to be fitted into models such as the CR-V SUV.

Toyota, for its part, is investing aggressively in its US battery capacity. Its North Carolina facility, its first battery plant outside Japan, is scheduled to begin operations in April. Toyota has earmarked the site to support its North American hybrid ambitions, which include raising electrified vehicle sales from 40% of its regional mix in 2024 to 80% by 2030.

Adding Honda as a client will help Toyota amortise the cost of the facility and ensure high utilisation rates. Other global manufacturers are also retooling in response to the policy shock. Since January, General Motors has scaled back output at its northern Mexico plant, where it manufactures Chevrolet electric vehicles.

In February, Stellantis temporarily halted production at its SUV plant in Ontario and has since reopened a previously shuttered plant in Illinois to assemble midsize pickup trucks.

Japanese automakers have long dominated the hybrid market. But as Washington reorders its priorities, even the most established players must revisit once-stable strategies. The collaboration between Honda and Toyota may signal not only a tactical pivot, but a deeper convergence of industrial interests in an era of uncertain global trade.