Honda Motor Co. plans to build a $3 billion factory in central Ohio to manufacture its next-generation hybrids, boosting its output capacity for the popular vehicles.

The Japanese automaker announced on Monday the new plant will start production in 2029 and expand its output by 240,000 vehicles a year. Honda has been mulling over the decision for months as part of a strategic pivot earlier this year away from all-electric vehicles. It aims to introduce 15 new hybrids globally by March 2030, primarily targeting North America.

“This is not simply an investment in another plant,” Bob Nelson, executive vice president of the company’s U.S. business operations, said at a press conference. “It is an investment in the future of Honda Manufacturing in America.”

Honda’s U.S. sales have risen 5% in the first 10 months of the year, powered by strong demand for hybrid versions of its best-selling CR-V compact SUV, Accord mid-sized sedan and compact Civic sedan. Fuel-efficient hybrids, which make up about a third of the company’s total sales volume in the U.S., have caught on with cost-conscious buyers as gas prices have soared.

Honda is preparing to introduce a new system that will provide hybrid options for its larger, V6 engine-powered vehicles such as the Pilot SUV and upscale Acura MDX SUV.

The new facility will be located between two existing auto assembly plants it operates in Ohio. It will be tooled to build gas-only, hybrid and fully electric vehicles, but the company didn’t provide a breakdown by production volume.

Honda also wouldn’t say which vehicles will be made in the new plant, but its focus will be on boosting output of models offering a hybrid option, including all-new models.

“The market has changed dramatically and it changed very quickly — faster than we could catch up, it seemed, at times,” Honda’s Nelson told reporters. “But we’re quickly developing new products based on the customers, and the hybrid’s very popular now for us.”

In a separate statement, it announced an investment of C$166 million ($118 million) in its Canadian factory in Alliston, Ontario, to make next-generation vehicles and for “the reintroduction of engine manufacturing.”

Honda was prepared to spend C$15 billion on an EV battery supply chain complex in Canada, but put that plan on indefinite hold in May. It also canceled a trio of battery-electric models it was preparing to manufacture in the U.S. But it began production this summer of battery cells at a $4.4 billion joint venture with LG Energy Solution in Ohio.

That facility was originally designed to build batteries for electric vehicles but has pivoted to make hybrid batteries, Nelson said.

U.S. trade relations with Canada and Mexico have been complicated by President Donald Trump’s tariffs on imports and his decision in July not to renew a North American free trade accord negotiated during his first administration. Trump has threatened to impose 50% levies on vehicles and auto parts made in Canada as of Jan. 1.

Honda has vehicle assembly operations in Ohio, Alabama and Indiana as well as in Canada and Mexico. In addition, it makes key parts such as engines and transmissions in Alabama, Georgia and Ohio. The company said on Monday that it will also make investments in a number of other facilities in North America, but not at its Mexican plant.

“There’s nothing to read into it, but it’s not impacted by this series of investments,” Nelson said.

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