Why America’s First Japanese Car Plant Is Moving To Avoid A Second Trade War

In just two years’ time, you won’t be able to buy a new Honda Accord built in Marysville, Ohio anymore. Reuters reports that Honda is packing up all the stuff needed to make the new Accord and sending it over to Indiana, where Accord production shall resume. This would be sad news if it weren’t for what’s happening to Marysville. Honda has announced that moving Accord production to Indiana “will maintain volume production of an important core model for Honda customers, while enabling [Marysville] to transition to EV production.” The marque’s Ohio complex will become its North American “EV Hub,” which would continue Marysville’s legacy as a plant for overcoming obstacles.

In the 1970s, American automakers had a problem. Due to a combination of complacency towards quality, dismissive sentiments towards small cars, and a series of oil shocks, a gaping hole opened up in the American automotive landscape big enough to drive truckloads of Japanese imports through. Cars like the Honda Civic and Datsun B210 were small, efficient, and exactly what Americans needed to fight fuel price blues. What’s more, by the 1970s, Japanese automakers figured out how to make cars that were reasonably reliable. Contrast that with overheating Chevrolet Vegas and fiery Ford Pintos, and Japanese cars became magnetic indeed.

In 1971, Toyota had a U.S. market share of 2.1 percent, Datsun 1.6 percent, and Honda basically a rounding error at 0.0 percent according to the analysts at WardsAuto. By the time 1980 rolled around, those numbers were up to 4.7 percent, 4.2 percent, and 2.6 percent respectively, with Subaru entering the ring with a metal chair at 0.9 percent market share. In less than a decade, Japanese automakers had gone from a curiosity to grabbing more than 12 percent of the total American car market. Needless to say, the American establishment was getting very worried.

Around the turn of the 1980s, Washington started a trade war, resulting in the implementation of voluntary export restraints. It’s a fun euphemism for Washington telling Japanese automakers that they could only import a certain number of cars per year, starting with a 1.68 million unit cap. Needless to say, this was a pretty bad deal for everyone. A restricted number of Japanese cars on the market caused the prices of those cars to rise, with American automakers seeing an opportunity to charge more money for their products. The loser, as ever, was the consumer. However, Honda already had a very clever yet very ambitious plan to sidestep these restrictions – build cars in America to exacting Japanese standards.

In 1982, Honda cut the ribbon on the first Japanese car plant in America, the Marysville Auto Plant. Built to crank out popular Honda Accords, vehicles assembled in Marysville wouldn’t fall under export restraints, so Honda could grow to new heights in America. Nissan followed suit with its 1983 Tennessee plant, then Toyota came along in 1986 with its NUMMI joint plant with General Motors. Now Americans had a proper supply of efficient, reliable Japanese vehicles.

The results were predictable. By 1989, Toyota had a market share of 6.1 percent, Honda five percent, Nissan 4.2 percent, and Subaru one percent. Add up just those four automakers, and you’d have 16.3 percent of the entire American market. Spurred on by this success, Japanese automakers started building even more products in America, and the results today speak for themselves. The voluntary export restraints were abolished in 1994, and Japanese cars are now everywhere.

While Japanese automakers haven’t needed to fight a massive trade war in decades, 2022 brought a curveball called the Inflation Reduction Act. Under this piece of legislation, new electric vehicles will only be eligible for tax credits if they’re built in North America and use battery materials from countries that aren’t from “foreign entities of concern” like China and Russia. Needless to say, this sent European and Asian automakers scrambling to set up American facilities.

After the whole Inflation Reduction Act thing went down, Honda announced a joint-venture battery plant with LG that will be based in Ohio. Expected to open in 2024, this plant should be in a good location to ship batteries to Honda’s Alliston plant in Canada and its assembly facilities in Ohio. Of course, batteries are heavy, so it shouldn’t be terribly surprising that Honda is moving full-steam-ahead with building EVs in Marysville to take advantage of a local supply chain and tax credits for customers. After all, no matter how good an overseas-built EV might be, $7,500 is $7,500 to most consumers.

History doesn’t repeat itself, but it sure does rhyme. Once all is said and done, Honda’s Marysville plant will have helped the company get through two trade disputes by offering Americans more affordable Japanese cars. Now all we need is for Honda to build an electric midsize sedan there, bringing everything full-circle.

(Photo credits: Honda)

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