In a world where shifting trade policies and rising tariffs are reshaping the automotive industry, Toyota is stepping up as a key player—not just as a carmaker, but as Toyota the EV battery supplier. With a massive $14 billion investment in its first overseas battery plant in North Carolina, Toyota is poised to meet the growing demand for hybrid vehicles (HVs) in the U.S. while forging an unexpected partnership with rival Honda. This move reflects broader trends among automakers as they adapt to a changing landscape marked by U.S. policy shifts, tariff threats, and a surging appetite for fuel-efficient hybrids. Here’s a deep dive into what’s happening, why it matters, and where it’s all headed.
A Strategic Shift Amid Tariff Tensions
The global auto industry is feeling the heat from U.S. President Donald Trump’s trade policies. With tariffs on imports from China climbing—starting with a 10% hike in February 2025 and another 10% added on March 4—and a proposed 25% tariff on Japanese auto imports looming (up from the current 2.5%), automakers are scrambling to rethink their supply chains. For Japanese giants like Toyota and Honda, which export around 1.3 million vehicles to the U.S. annually, these changes could translate into billions in additional costs. Analysts estimate that a 25% tariff could saddle the U.S. subsidiaries of six major Japanese automakers with a $20 billion bill, with ripple effects hitting components like batteries.
Honda, which sold 308,000 hybrids in the U.S. in 2024 (22% of its 1.42 million total sales), has been sourcing batteries from Japan and China for its American-made vehicles. But with tariffs threatening to inflate costs, the company is turning to a surprising ally: Toyota. Starting in fiscal 2025, Honda will procure batteries from Toyota’s North Carolina plant for roughly 400,000 hybrids annually—enough to cover all its U.S. HV sales. This collaboration marks a rare instance of Japan’s two biggest automakers joining forces, driven by necessity rather than rivalry.
Toyota’s new facility, Toyota Battery Manufacturing North Carolina (TBMC), spans seven million square feet—equivalent to 121 football fields—and is set to begin shipping batteries in April 2025. As Toyota the EV battery supplier, the company isn’t just supporting its hybrid lineup; it’s now a linchpin for Honda’s ambitions too. Models like the Honda CR-V, a popular SUV, are likely candidates to benefit from this supply.
Hybrids Take Center Stage
The timing couldn’t be better for Toyota the EV battery supplier. While electric vehicles (EVs) were once the darlings of the automotive world, U.S. demand has cooled. Trump’s decision to scrap Joe Biden’s EV promotion initiatives has only accelerated this shift, redirecting focus to hybrids—vehicles that blend gasoline engines with electric motors for better fuel efficiency. S&P Global Mobility projects U.S. hybrid sales will soar to 4.12 million units by 2030, a 2.5-fold increase from 2024, making up a quarter of new car sales. For Japanese automakers, this is a golden opportunity.
Toyota is leaning hard into this trend. The company aims to boost its electrified vehicle sales (hybrids, plug-in hybrids, and EVs) in North America from 40% of its total in 2024 to 80% by 2030. Honda, meanwhile, plans to increase its global hybrid sales (excluding China) by 50%, from 2024’s level to 1.3 million units by 2030. With Toyota the EV battery supplier providing a steady stream of batteries, both companies are positioning themselves to dominate this growing market.
Why North Carolina?
Toyota’s $14 billion bet on North Carolina isn’t just about dodging tariffs—it’s about scale and efficiency. As Toyota the EV battery supplier, the company gains a foothold in the U.S., reducing reliance on overseas production and cutting shipping costs. Adding Honda as a client boosts the plant’s output, spreading the massive investment across more units and lowering per-battery costs. This kind of economies-of-scale thinking is critical as automakers face rising expenses from tariffs and supply chain disruptions.
For Honda, the move is a lifeline. The company estimates that 25% reciprocal tariffs on goods from Mexico and Canada—where it also produces vehicles—could cost it $4.7 billion annually. Shifting some production to the U.S. and tapping Toyota the EV battery supplier for local batteries helps cushion the blow. It’s a pragmatic response to a chaotic trade environment, one that other automakers are echoing. General Motors, for instance, scaled back production at its northern Mexico plant in January 2025, while Stellantis paused operations at its Ontario factory in February, opting instead to reopen a shuttered Illinois facility.
The Bigger Picture: A Global Supply Chain Shake-Up
This Toyota-Honda partnership is part of a broader realignment in the auto industry. As Trump pushes to boost U.S. oil production and roll back clean-energy policies, automakers are hedging their bets. Hybrids, with their proven technology and consumer appeal, offer a bridge between traditional gas-powered cars and a fully electric future. Toyota the EV battery supplier is at the heart of this shift, proving that battery production isn’t just for EVs—it’s a cornerstone of the hybrid boom.
The tariff threat isn’t limited to Japanese firms. American giants like GM, Ford, and Stellantis, which build vehicles in Canada and Mexico, are also feeling the pinch. GM’s Mexican plant, home to electric models like the Chevy Equinox and Blazer, saw output cuts in early 2025. Stellantis halted production at its Brampton Assembly Plant in Canada, where it planned to launch the Jeep Compass EV. These moves underscore a stark reality: no one’s immune to the upheaval.
For Toyota, the North Carolina plant is a strategic masterstroke. As Toyota the EV battery supplier, it’s not only supporting its own electrification goals but also becoming a critical partner for competitors like Honda. This flexibility could give Toyota an edge as the industry navigates uncertain waters.
What’s Next for Toyota and the Hybrid Market?
Toyota’s ambitions don’t stop at hybrids. While the company has been slower to roll out pure EVs in the U.S., recent unveilings in Europe—like the updated bZ4X and three new electric SUVs—hint at bigger plans. With Toyota the EV battery supplier now powering both its own hybrids and Honda’s, there’s potential for the North Carolina plant to evolve into a hub for EV batteries too. Honda, which sold 40,400 EVs in the U.S. in 2024 alongside its hybrids, might also tap Toyota’s supply for future electric models.
The hybrid surge isn’t a flash in the pan. Consumers like them for their efficiency and lower upfront costs compared to EVs, while automakers appreciate their profitability and simpler infrastructure needs—no sprawling charging networks required. Toyota the EV battery supplier is riding this wave, but it’s also laying the groundwork for whatever comes next. Whether that’s more EVs or an even bigger hybrid push, the North Carolina plant positions Toyota as a leader in electrification, tariffs or not.
Challenges Ahead
It’s not all smooth sailing. Tariffs could still escalate, driving up costs for components beyond batteries. Japan’s automakers, reliant on complex global supply chains, might face further disruptions if trade tensions worsen. And while hybrids are hot now, a sudden policy swing back toward EVs—or a breakthrough in battery tech—could shift priorities again. For Toyota, the EV battery supplier, staying nimble will be key.
Honda, too, has its work cut out. Restructuring its supply chain is costly and complex, and the $4.7 billion hit from North American tariffs looms large. Leaning on Toyota helps, but it’s not a cure-all. Both companies will need to keep adapting as the U.S. market evolves.
A New Era of Collaboration
The Toyota-Honda deal signals a shift in how automakers operate. Rivals are becoming partners, driven by shared challenges like tariffs and shifting consumer tastes. Toyota the EV battery supplier isn’t just a title—it’s a role that could redefine industry dynamics. As the North Carolina plant hums to life in April 2025, it’s worth watching how this partnership shapes the future of hybrids—and maybe even EVs—in the U.S.
For now, one thing’s clear: Toyota’s $14 billion gamble is paying off. By powering Honda’s hybrids and its own, Toyota the EV battery supplier is proving that in a turbulent world, adaptability is the ultimate horsepower. Whether you’re a car enthusiast or just someone who likes saving on gas, this is a story with wheels—and it’s only just getting started.