Tariff Anxiety Makes Honda & Toyota Strange Bedfellows

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It’s sounds like the plot from Smokey and the Bandit — “The boys are thirsty in Atlanta and there’s beer in Texarkana.” Except in this case, there are batteries in North Carolina and cars that need batteries in Ohio. Toyota is building a $14 billion battery factory in North Carolina which it says will have 14 production lines, including four supporting battery production for hybrid vehicles and ten supporting battery production for battery electric vehicles and plug-in hybrid electric vehicles. That’s all fine and dandy, but Toyota won’t need all those batteries for its own vehicles until sometime in the middle future. So who is going to buy all those batteries from Toyota?

Honda. According to Yahoo!, in an unexpected move to navigate the shifting landscape of US tariff rules, Honda will buy batteries for its hybrid offerings from Toyota. The deal, first reported by the Japanese newspaper Nikkei, allows Honda to sidestep hefty import tariffs on components sourced from China and Japan while giving Toyota’s North Carolina battery plant an early win.

Tariff Policies Dictate Manufacturing Priorities

Honda has been buying batteries from manufacturers in Japan and other regions outside the United States and shipping them to the country for use in its production there, says Kyoto News. This rare collaboration between Japan’s two biggest automakers comes as the global auto industry grows increasingly wary of Trump’s trade policy, which includes a plan to introduce a 25% tariff on auto imports. Demand for hybrid cars is growing in the United States. Honda sold about 310,000 hybrid cars in the US in 2024, accounting for more than 20% of its sales according to the company. Honda said it will double its global hybrid car sales, excluding those in China, to 1.3 million units by 2030.

Toyota and Honda have been fierce competitors for decades, battling for dominance in the hybrid market. But with the current administration’s new tariffs, including a new 10% levy on Chinese imports that took effect this month and an expected jump from 2.5% to 25% on vehicles built in Japan, Honda is under pressure to rethink its supply chain. Rather than absorb the costs or pass them to consumers, the company is securing 400,000 Toyota-built hybrid battery packs per year starting in April of this year.

The move makes sense for both automakers, Autoblog says. Honda is planning to expand its hybrid lineup and needs a stable, tariff-free battery supply. Toyota, meanwhile, gets a major customer to help justify its massive battery investment in North Carolina. The deal also signals a broader trend of Japanese automakers toward reducing dependence on Chinese suppliers in favor of domestic or US based production. While details on which Honda models will use batteries sourced from Toyota remain unclear, the popular CR-V Hybrid is a strong contender. With Honda aiming to grow hybrid sales, securing a battery supplier based in the US helps ensure production remains uninterrupted, even if tariffs on imported components continue to rise.

This is not an alliance in the traditional sense. Honda is simply purchasing batteries from Toyota without a reciprocal deal in place. Toyota’s North Carolina plant, covering over seven million square feet, will be a key supplier not just for its own hybrid and EV models, but also for other automakers.

Honda and Toyota are not the only manufacturers reconfiguring their supply chains to avoid tariffs. Volkswagen and Porsche are weighing US production to bypass import duties, while Volvo delayed the launch of the EX30 to dodge a 100% tariff on Chinese-made EVs. Meanwhile, domestic automakers like GM and Stellantis have already cut production at plants in Canada and Mexico, where tariffs could soon hit hard.

For Toyota, the deal with Honda helps justify its $14 billion US battery investment. For Honda, it’s a way to avoid price hikes and maintain competitiveness in a rapidly changing market. As trade policies continue to shift, more automakers may find themselves making similar unexpected partnerships to keep their businesses running smoothly. Whether this deal evolves into something more remains to be seen. If tariffs continue to escalate, we could see further collaboration between automakers that once saw each other strictly as rivals. For now, it’s a pragmatic business decision, one that underscores just how much the global automotive landscape is shifting.

Toyota C-HR+ May Come To US

Part of the shift is reflected in the announcement last week that Toyota will be introducing a new battery electric car called the C-HR+ in Europe. It is about six inches shorter than the Toyota bZ4X and has a 108.3 inch wheelbase. The new electric CUV has nothing in common with the C-HR that was sold in the US a few years ago. It is built on the latest e-TNGA platform, which also underpins the revised bZ4X. In Europe, the C-HR+ offers a single-motor, front-wheel-drive configuration that delivers either 164 or 221 horsepower, depending on the size of the battery. There is also a dual-motor, all-wheel-drive version that packs 337 horsepower. Toyota has left the door open to offering that car in the US market, in which case it will be fitted with batteries from its North Carolina factory.

In Europe, two battery packs will be offered, one rated at 51.9 kWh and the other rated at 69.3 kWh. Toyota will offer onboard Level 2 AC chargers of 11 kW or 22 kW. Both battery packs can accept up to 150 kW of power from a DC fast charger. The C-HR+ also has a battery pre-conditioning system to optimize charging in cold or hot conditions, and a heat pump is included to help with efficiency.

Inside the C-HR+, drivers will find a digital gauge cluster mounted high on the dash, a 14.0 inch center-mounted touchscreen, and a dashboard nearly identical to the one currently found in the recently revised bZ4X. Toyota says there are about 15 cubic feet of space in the cargo area behind the back seats. Every C-HR+ also has a host of driver assists, including automatic high beams and blind spot monitoring. The C-HR+ goes on sale in Europe in late 2025. The US could get it as a companion model to the bZ4X as a second Toyota EV for America, but probably not until 2026.

The decision whether to bring that car to the US will hinge on whether Toyota decides to manufacture it in-country. Once again, the rapidly shifting tariff situation will be a deciding factor for whether American drivers get the C-HR+ or not. It is damnably difficult to know whether to spend the time and money to build it in the US if the tariff piece of the puzzle keeps changing. The bZ4X has not lit any fires under US consumers, but there is a strong trend toward somewhat smaller, more maneuverable cars, and the C-HR+ would fit nicely with what many new car shoppers are looking for.