Carney government to replace EV sales targets with rebates, incentives and new fuel efficiency standards

“It allows the industry to continue to deal with this very challenging U.S. tariff situation, removes a redundant and costly regulatory burden, while still supporting electrification,” which is a shared goal, said Brian Kingston, head of the Canadian Vehicle Manufacturers’ Association. “We want to reduce emissions and get more people into EVs, but a punitive mandate was clearly not the way to do it.”

Flavio Volpe, of the Automotive Parts Manufacturers’ Association, said, “I’m happy that it appears we’ll move into a much more realistic formula without relenting on the path of modernization that, includes electrification, but might include mass deployments of hydrogen or hybridization.”

Neither could confirm additional changes to come, but a government source confirmed the new strategy will reintroduce consumer incentives or rebates to buy EVs.

It may also include more funds for building out EV public charging infrastructure.

Kingston said there is currently a gap of about 60,000 charging stations for the needs across the country.

Unifor president Lana Payne says any strategy is just the start of a plan to ensure investment and production are drawn here to ensure Canadian workers and Canadian-based carmaking has a future.

Prime Minister Mark Carney and Industry Minister Mélanie Joly will unveil the long-promised strategy on Thursday that aims to support workers and Canadian based manufacturing at a time when Donald Trump’s auto tariffs have put intense pressure on the industry, with two of the Big 3 U.S.-based automakers having shifted or reduced production to south of the border.

The biggest ask on the industry side is the repeal of the EV sales mandate.

Carney paused the 2026 mandate to require 20 per cent of sales to be EVs last fall while it reviewed the targets of 60 per cent by 2030 and 100 per cent by 2035. But the Carney Liberals believe that the future of the industry lies in electric vehicles and that the Canadian industry — on the supply and demand side — must transition.

Kingston said in an interview with the Star the EV mandates established “unachievable and unattainable targets.”

“It is putting significant costs on auto manufacturers at the worst possible time. Complying with this regulation requires that manufacturers either restrict their sales of gas-powered vehicles in Canada or purchase compliance credits at a cost of billions of dollars.”

“If you look at Canada’s current production of vehicles. Over 95 per cent of what we currently build in Canada will be prohibited for sale in nine years under the EV mandate. That makes absolutely no sense,” he said.

Kingston said the regulation established a scheme where, if a company couldn’t meet the prescribed sales ratio, it could purchase credits from other manufacturers who have a surplus. The government established the price of a credit at $20,000. Given “the gap between existing sales and the mandated targets, between now and 2030, we are looking at about a $3-billion cost implication for manufacturers,” he said.

Further, the EV mandate was “duplicative” because it came on top of existing regulations that require companies to decrease their amount of greenhouse gas emissions year over year, Kingston said.

Overall, Kingston said, any new auto strategy needs to “protect Canada’s auto manufacturing footprint and all of the people it employs.”

That is what Unifor’s Lana Payne said must be the priority.

“Of course we need to make sure that workers supports are robust in the case of transition,” said Payne. But equally, she said, “our key priorities are how do we keep production in Canada? How do we support it? How do you incentivize it? And if Canadians are buying two million cars in Canada, how do we make sure we’re building as many of them as possible.”

“If automakers want to sell in Canada they have to build and invest in Canada and we’ve seen too much of our market basically just you know access being given to countries and companies all over the world that don’t invest here.”

Payne pointed to Chinese carmakers — which next month can begin importing up to 49,000 EVs this year into Canada’s auto market, but whose track record is dismal for building and manufacturing outside China.

Payne also pointed to South Korea’s Hyundai, which sells thousands of vehicles in Canada but does not manufacture them here.

In fact, Ottawa said in 2024, 12 per cent of vehicles sold in Canada, or about 228,000 vehicles, were made by South Korean automakers.

Labour and industry leaders agree more investment and production must be lured here.

Outside of persuading the U.S. to remove its section 232 tariffs on autos, steel and aluminum, the goal is to make sure that manufacturing in Canada is competitive, Kingston said, and “right now, the EV mandate makes it deeply uncompetitive to be here.”

He added that last month’s deal to allow China a small import quota, and bringing “China into the Canadian market, what the federal government has done is really throwing a stick in the spokes of our overarching electrification strategy.”

Kingston also challenges the Carney government’s assertion that the Chinese carmakers have only a small chunk of the market.

Firstly, he says, “there is no Chinese manufacturer that would come to Canada and build vehicles purely for the Canadian market. So I question the premise that you can have these companies investing here if we don’t have clarity on the relationship with the U.S. and the U.S. has been pretty clear: they don’t want Chinese vehicles in their market, and in fact, they’ve got a ban on Chinese connected vehicle software, and hardware, and are taking other measures to make sure that that doesn’t happen.”

Secondly, he said, the U.S. has clear concerns about the data collection capabilities of China’s “highly connected vehicles.”

“We’re seeing countries around the world take steps to reduce their exposure to Chinese EVs, and Canada appears to be moving in a different direction.”