Honda Shifts Civic Hybrid Production to Indiana to Avoid U.S. Tariffs
Tokyo, March 3 (Reuters) – Honda (7267.T) has decided to produce its next-generation Civic hybrid in Indiana, USA, instead of Mexico, to avoid potential tariffs on one of its top-selling models, according to three sources familiar with the matter.
This move highlights how automakers are adapting to U.S. President Donald Trump’s proposed 25% tariffs on goods from Mexico and Canada. While many car companies have expressed concerns about these tariffs, Honda is the first major Japanese automaker to take action by relocating production to the U.S.
Originally, Honda planned to manufacture the new Civic in Guanajuato, Mexico, with production set to begin in November 2027. Rising costs made it difficult to produce the car in Indiana and Canada, leading to the initial choice of Mexico. However, the company has now decided to build the Civic in Indiana starting May 2028, with an expected annual production of around 210,000 units. If demand exceeds Indiana’s output, Honda may import vehicles from countries not affected by tariffs.
Honda’s decision shows how disruptive U.S. tariffs could be for industries that rely on complex production plans and investments across different markets. Last year, Honda sold 1.4 million vehicles in the U.S., including Acura models. The Civic, known for its affordability, was Honda’s second-best-selling model in the U.S., with over 240,000 units sold. U.S. sales of the Civic grew by 21% compared to the previous year.
About 40% of Honda’s U.S. sales come from vehicles imported from Mexico and Canada. Additionally, Honda exports around 60,000 U.S.-made cars to Mexico and Canada. If these countries impose retaliatory tariffs, Honda could face even higher costs.
This strategic shift reflects Honda’s efforts to navigate trade challenges while maintaining its strong presence in the U.S. market.
Conclusion
Honda’s decision to shift production of its next-generation Civic hybrid from Mexico to Indiana highlights the growing challenges automakers face in navigating U.S. trade policies. By moving production to the U.S., Honda aims to avoid potential tariffs on Mexican imports and protect its competitive edge in one of its most important markets. This move underscores the broader impact of trade tensions on global industries, forcing companies to rethink production strategies and adapt to changing economic landscapes.
As Honda prepares to produce the Civic hybrid in Indiana starting in 2028, the company demonstrates its commitment to maintaining its strong presence in the U.S. market while addressing rising costs and trade uncertainties. However, with 40% of its U.S. sales still reliant on imports from Mexico and Canada, Honda remains vulnerable to further disruptions if retaliatory tariffs are introduced.
This strategic shift not only reflects Honda’s proactive approach to trade challenges but also serves as a reminder of the complex decisions automakers must make to balance costs, market demands, and geopolitical risks in an increasingly interconnected world.