A trade war might have been the trigger, but Prime Minister Mark Carney’s decision to pause the federal government’s electric vehicle sales mandate is also a reflection of reality, industry experts say: EV sales are nowhere near meeting government targets.
In an announcement Friday, Carney ditched a requirement for 20 per cent of vehicles sold in Canada in 2026 to be electric and said the government would hold a 60-day investigation into the rest of the EV mandate “to identify future flexibilities and ways to reduce costs.” There’s a 60-per-cent target by 2030, and a 100-per-cent target by 2035.
“This will provide immediate financial relief to automakers at a time of increased pressure on their competitiveness,” said Carney.
According to auto industry analysts, electric vehicles are still a relatively small fraction of vehicles sold in Canada.
“Year-to-date, you’re looking at about 7.7 per cent for traditional auto makers. And maybe just under 10 per cent if you include direct-to-consumer brands like Tesla,” said Robert Karwel, senior manager of J.D. Power’s Power Information Network, a vehicle sales database.
No one who’s been paying close attention to auto industry trends is surprised that the government is stepping back from the target, at least temporarily, said Ryan Robinson, who leads the automotive practice at Deloitte Canada.
“To a large extent, this was kind of inevitable,” said Robinson. “That was always going to be a hard target to hit, and we knew that. The closer we got to the stake in the sand … the more unrealistic that target appeared.”
The biggest stumbling block to higher EV adoption, Karwel and Robinson said, is that EVs are still substantially more expensive than cars powered by traditional internal combustion engines.
“It’s dollars and cents,” said Karwel. “People are already worried about inflation and the price of real estate and now you’re forcing them to buy a car that is much more expensive because it carries a certain type of power train.”
Karwel estimated that the price gap between comparable models of ICE and EVs is still almost $10,000, even if the gap is smaller than it once was.
While allowing imports of cheaper EVs from Asia — particularly China — would likely lead to an uptick in sales, the government is likely leery of the economic and political fallout, Karwel suggested.
“You can have cheaper, Asian, Chinese imports which are EVs, but we will destroy the auto industry in Ontario, so what’s it gonna be? And I don’t think the outcome of that is clear,” said Karwel.
The head of the association representing the Big Three Detroit automakers in Canada was pleased at news of the 60-day review, but wants the EV mandate killed entirely.
“This regulation is redundant, it’s unnecessary, and it’s costing manufacturers who build cars in Canada and employ Canadians significant sums of money, so it needs to go away,” said Brian Kingston, president and CEO of the Canadian Vehicle Manufacturers’ Association.
The gap between the mandated sales targets and what Canadians are actually buying is simply too big, said Kingston.
“The gap is so large, it’s just simply not possible to close and it costs companies the longer that this is delayed,” said Kingston. “I’m encouraged that (the government) heard that there is a problem and they’re willing to take a hard look at it, but obviously the outcome needs to be clearer and quick.”
The head of the Automotive Parts Manufacturers’ Association said the government’s decision to pause the EV sales target was especially needed given that the entire automotive industry is facing financial hardship because of the trade war prompted by tariffs from U.S. president Donald Trump.
“The White House has turned on the industry while we’re trying to make sure that those foreign automakers remain committed here, so let’s not punish them with $3 billion in new costs,” said APMA CEO Flavio Volpe.
Manufacturers were facing fines of $20,000 for each vehicle sold beneath the 20-per-cent threshold. In order to meet the target, manufacturers likely would have restricted the number of ICE vehicles they sold, said J.D. Power’s Karwel.
“Now, they’ll sell more gas cars because they don’t have to artificially restrict sales. And they avoid getting those $20,000 fines,” said Karwel.
At Queen’s Park, Ontario Premier Doug Ford said he is not concerned that Carney is putting the federal government’s EV mandate on hold at a time when both Ottawa and Ontario have invested heavily in EV battery plants in Windsor and St. Thomas to support next-generation auto industry jobs.
“The market dictates, the people dictate, not the government,” the premier said in reference to slower-than-forecast growth in electric vehicle sales that has prompted some auto manufacturers to scale back their EV production plans.
“If you can’t hit it, you can’t hit it,” added Ford.
Proponents of the policy charge that a sales mandate is a key prong of Canada’s plan to meet its climate targets, a necessary measure in helping automotive manufacturers transition into increased electric vehicle production, and a policy that could pay off for Canadians in the long run.
Joanna Kyriazis, a policy director with Clean Energy Canada, said that any review of the EV mandate should be focused on affordability, citing research that has shown the policy could slash the cost of an electric vehicle by as much as $20,000.
“We know that EVs save a lot of money for Canadians on gas. But the upfront cost still continues to be a challenge, particularly in Canada, where we’ve kind of walled off our car market, unlike other parts of the world like the EU, the UK and Australia,” Kyriazis said.
“We think that other tweaks could also be added to the policy, like giving carmakers extra credit for bringing in cars under the price point of $40,000, or giving carmakers extra credit for offering zero per cent financing to better drive that affordability of cars,” she added.
With files from Raisa Patel, Alex Ballingall and Rob Ferguson
