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In a strategic move to navigate potential U.S. tariffs, Honda has decided to produce its next-generation Civic hybrid in Indiana instead of Mexico, according to insider sources. This decision highlights how automakers are adapting to the evolving trade landscape under U.S. President Donald Trump’s proposed 25% tariffs on goods from Mexico and Canada.

Key Highlights

  • Honda will produce approximately 210,000 Civic hybrids annually in Indiana, starting from May 2028.
  • The production shift comes as a response to avoid potential tariffs on one of Honda’s top-selling models.
  • Initially, the Civic was planned to be manufactured in Guanajuato, Mexico, with production set to begin in November 2027.
  • Rising production costs in Indiana and Canada had initially made Mexico the preferred choice.
  • Honda may import vehicles from tariff-free countries if Indiana’s production falls short of demand.
Honda Civic Hybrid on display
The Honda Civic Hybrid, a top-selling model in the U.S. (Source: Reuters)

Why the Shift?

Mexico has long been a cost-effective production hub for global automakers, including Honda. However, the proposed U.S. tariffs have forced companies to rethink their strategies. Honda’s Chief Operating Officer, Shinji Aoyama, had previously warned that the company would consider shifting production if permanent tariffs were imposed.

This move underscores the challenges automakers face in balancing cost efficiency with trade policies. Honda’s decision also reflects the broader impact of tariffs on industries that rely heavily on cross-border supply chains.

The Civic’s Popularity in the U.S.

The Honda Civic remains a favorite among American consumers, known for its affordability and reliability. In 2024, U.S. sales of the Civic surged by 21% year-on-year, with over 240,000 units sold. This makes the Civic Honda’s second-best-selling model in the U.S., trailing only the CR-V.

Honda Indiana Production Plant
Honda’s Indiana plant, where the next-gen Civic will be produced. (Source: Honda)

Broader Implications

  • About 40% of Honda’s U.S. sales come from vehicles imported from Mexico and Canada.
  • Honda also exports around 60,000 U.S.-made vehicles to Mexico and Canada, which could face retaliatory tariffs, further increasing costs.

What’s Next for Honda?

A Honda spokesperson declined to comment on the specifics of the Civic production plan but emphasized that the company would continue to monitor demand and the global business environment to ensure optimal production and allocation.

FAQs

1. Why is Honda shifting Civic production to Indiana?

Honda is shifting production to Indiana to avoid potential U.S. tariffs on vehicles imported from Mexico. This move is a response to President Donald Trump’s proposed 25% tariffs on goods from Mexico and Canada.

2. When will the new Civic production begin in Indiana?

Production of the next-generation Civic hybrid in Indiana is expected to begin in May 2028.

3. How many Civics will Honda produce annually in Indiana?

Honda plans to produce approximately 210,000 Civic hybrids annually at its Indiana plant.

4. What makes the Honda Civic so popular in the U.S.?

The Honda Civic is known for its affordability, reliability, and fuel efficiency. In 2024, U.S. sales of the Civic increased by 21% year-on-year.

5. How will tariffs impact Honda’s operations?

Tariffs could increase production costs and disrupt supply chains. Honda may also face retaliatory tariffs on vehicles exported from the U.S. to Mexico and Canada.