Automakers are adjusting as the Biden administration’s new rules on electric vehicle (EV) tax credits have gone into effect. Vehicles can now only qualify if they meet a variety of manufacturing requirements that put stricter limits on where the materials used to build them and their batteries can be sourced from.

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The EVs must also undergo their final assembly within the continent of North America. As a result, more car companies have been exploring changes to comply with these new requirements, and Honda is the latest to do so.

The Japanese automaker has reportedly been considering construction of a nearly $14 billion electric vehicle plant in Canada. This anticipated facility may also be equipped to handle in-house production of EV batteries, which could allow electric Honda vehicles made there to receive full federal tax credits.

“Federal government representatives are engaging with Honda on an ongoing basis – as they do with all other major potential investors,” said Audrey Champoux, a spokesperson for Industry Minister Francois-Philippe Champagne. “It is a testament to Canada’s growing reputation as a green supplier of choice and global EV leader.”

This news comes after prior attempts by the company to break into the EV industry have fallen short. Honda CEO Toshihiro Mibe said the company has “recognized we are slightly lagging behind” in regards to their EV efforts.

In 2023, electric vehicles accounted for less than 1% of Honda’s total worldwide sales and plans to boost those numbers in the future are also running into roadblocks. Last fall, a $5 billion deal between Honda and General Motors to jointly develop affordable EVs was scrapped after the automakers determined their sub-$30,000 pricing goal was not yet feasible.

“After studying this for a year, we decided that this would be difficult as a business, so at the moment, we are ending development of an affordable EV,” Mibe said after the partnership was discontinued.

Despite these setbacks, Honda has said it still remains committed to reaching 100% electrified vehicle sales by 2040, a goal the company’s potential EV plant in Canada would likely play a major role in helping achieve. A decision on the location of the site is expected by the end of this year, and it could become operational by as early as 2028.