Toyota Motor will receive about CAD34m ($34.2m) from the Canadian and Ontario governments to retool its Cambridge plant to manufacture hybrid cars in Canada.
Both the federal and provincial governments will contribute about CAD16.9m ($17m) in the Cambridge plant.
The move follows the company's announcement made in July 2012 to invest over $100m to increase the production of Lexus sedan and RX450h hybrid sport utility vehicle (SUV) in Canada.
Canada, Prime Minister Stephen Harper said that the RX 450 hybrid is the first hybrid vehicle being assembled in Canada.
"Our government is committed to helping Canada's automotive sector remain globally competitive and prosperous," Harper said.
The development, which is scheduled to start in early 2014, is expected to increase the Cambridge plant's manufacturing capacity by 30,000 vehicles to 104,000 units per year that includes 15,000 Lexus RX450h hybrid electric vehicles.