Canada is on the verge of an agreement with Honda Motor Co. that would see the Japanese firm build electric vehicles and their components in the province of Ontario, according to people familiar with the matter.

The deal, expected to be announced within a week, involves a multibillion-dollar commitment by Honda for new facilities to process cathode active materials, build batteries, and assemble battery-powered vehicles — making southern Ontario a key hub of company’s EV manufacturing plans in North America.

The Canadian government will subsidize a portion of the capital cost, the people said, speaking on condition they not be identified because the matter is still private.

Honda has a manufacturing plant in Alliston, Ontario, about an hour’s drive north of Toronto, where it puts together Honda CR-V and Civic models. The company makes hybrid vehicles at factories in Ohio and Indiana, according to its website, and it plans to start manufacturing its first U.S.-made fully electric vehicles in Marysville, Ohio next year.

The Honda investment comes at an anxious moment for the auto sector, with consumer adoption of electric vehicles playing out slowly in some regions because of high prices and a shortage of charging stations. Tesla Inc. is cutting more than 10% of its global workforce, Chinese producer BYD Co. reported a sharp drop in deliveries of electric vehicles in the first quarter, and other automakers have delayed EV investments.

Still, manufacturers are making long-term bets. Last month, Honda and Nissan Motor Co. announced a plan to collaborate on technology for battery-based electric vehicles, including software, as they seek to keep up with Chinese rivals.

Hours after Bloomberg News reported the agreement, Ontario Premier Doug Ford appeared to confirm it, though he didn’t mention Honda by name. “This week we landed a new deal,” he said Monday at a conference in Toronto. “It’ll be the largest deal in Canadian history. It’ll be double the size of Volkswagen. So stay tuned, I’ll be announcing it this week.”

Ford was referring to a C$7 billion ($5.1 billion) Volkswagen AG battery assembly plant announced last year for southern Ontario.

The negotiations between Honda and Prime Minister Justin Trudeau’s government have taken many months and centered on investment tax credits, or ITCs, as the means by which the government will help pay for the capital costs of the factories. It will differ from the agreements Canada struck last year with Volkswagen, Chrysler parent Stellantis NV and Sweden’s Northvolt AB, the people said; those companies were offered billions of dollars over a period of years to subsidize battery production.

Trudeau’s government will tout the Honda deal as a success story directly related to those contracts, one government official said. Those agreements created an ecosystem around Canada’s EV supply chain, attracting other auto firms and allowing the government to transition to its own system of tax incentives, officials within the Trudeau administration will say.

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