Ottawa’s return of the federal EV sales rebate will likely resuscitate slumping demand for electric vehicles, industry watchers say.
A key plank of a new $6-billion federal automotive strategy unveiled by Prime Minister Mark Carney Thursday is a $5,000 sales rebate for fully electric vehicles, and a $2,500 rebate for plug-in hybrids.
It’s “a great day,” Carney said while announcing the plan at a press conference in Vaughan Thursday morning.
“We’re building a strong Canadian auto sector where our workers build the cars of the future,” the PM said, “and we’re launching a new program to make EVs more affordable for Canadians.”
Ryan Robinson, head of automotive research at Deloitte, welcomed the news.
“If we think about what the removal did to sales … I think that bringing it back will be a good thing.”
In 2025, EV sales plunged after the end of the federal sales rebate, along with the demise of several provincial ones, Robinson noted.
In November, just over 17,000 new zero emission electric vehicles were sold across the country, a drop of 35.6 per cent from November, 2024, according to Statistics Canada.
Capping the purchase price of vehicles eligible for the rebate at $50,000 is also good for consumers, Robinson argued.
“It removes the incentive for manufacturers to maximize the price because they government is doing the heavy lifting,” Robinson said.
The rebates are expected to be restored “within two weeks,” according to federal officials.
For zero emission vehicles, the rebate begins at $5,000 and drops each year, reaching $2,000 by 2030.
For plug-in hybrids, the rebate starts at $2,500, and drops to down to $1,000 by 2030.
The rebate will only apply to vehicles built in countries which have a free-trade agreement with Canada, which rules out EVs built in China, including Chinese brands such as BYD, which sell for as little as $25,000.
“The government made it clear. They’re saying ‘we’re not going to apply this to cheap Chinese EVs,” said Robert Karwel, automotive industry researcher at J.D. Power Canada.
Last month, Canada signed a deal which allows 49,000 Chinese EVs into the country this year at the “most-favoured nation” tariff rate of 6.1 per cent.
In exchange for backing away from its 100 per cent tariff on Chinese EVs, the Canadian government convinced China to cut its tariff on Canadian canola seeds from 100 per cent to 15 per cent. The deal also reduced tariffs on Canadian lobster, crab and peas.
Despite the $5,000 rebate, consumers might not end up saving the full amount when they get add up all the costs, Karwell suggested. That’s because with the return of the rebate, manufacturers might be tempted to drop some of their own discounts they introduced after the previous rebate was killed off, he argued.
“Are EVs going to get cheaper? Probably not. Because manufacturers are probably going to back off some of their own sales incentives,” Karwell said. “It’s certainly not going to be … $5,000 cheaper, net.”
The typical price difference between an internal combustion engine version of a car and an electric version of the same model is around $10,000, Karwell estimated.
Even if consumers don’t see a full, $5,000 drop in their all-in price, they’ll still be more likely to purchase an EV than they were before the return of the rebate, Karwell said. It’s a basic of consumer behaviour, he said.
“If you offer someone a discount, they’re going to think they’re getting a good deal,” Karwell said.
Federal plans to invest $1.5 billion in charging infrastructure via the Canada Infrastructure Bank will also provide an EV sales boost, Karwell said.
“It’s going to help a person who was already considering buying one.”
The rebate and the promise of spending on charging infrastructure address the two biggest obstacles to EV sales, said Gal Raz, a professor at Western University’s Ivey Business School.
“The main disincentive has been the price gap. … The other side is the infrastructure,” said Raz. “To make a difference, you really need to get the price down … and invest in the infrastructure.”
As for whether a $5,000 rebate will really make a difference for a consumer able to afford a $50,000 purchase, Raz said it’s the difference which matters, not the overall price tags.
“When people buy things, they look at the value,” said Raz. “It’s not about whether you can afford it. It’s really the comparison. And there’s a $5,000 to $10,000 difference even with a hybrid.”
