Canada’s EV rebates returning, sales mandate ending

The federal government is launching a new electric vehicle consumer rebate, and replacing the contentious EV sales mandate with new emissions standards, as part of a new strategy for the Canadian auto sector.

In a bid to make it more affordable for Canadians to purchase lower-emission vehicles, the government is launching a new five-year $2.3 billion EV affordability program, that will be available to consumers as of Feb. 16.

The program will offer individuals and businesses purchase or lease incentives of up to $5,000 for battery electric and fuel EVs, and up to $2,500 for plug-in hybrid models (PHEVs).

“The future of the auto industry is increasingly electric and connected,” Prime Minister Mark Carney said, unveiling of his government’s transformation plans at a parts manufacturing facility in Woodbridge, Ont.

“To remain competitive and realise our potential, we must develop the entire value chain for next-generation vehicles.”

The rebates will only be available for vehicles imported from a country that has a pre-existing free-trade deal with Canada, and that cost less than $50,000. These parameters mean the coming allowance of a small number Chinese EV’s that caused acrimony between Carney and Ontario Premier Doug Ford won’t qualify for this benefit. There will be no price cap on Canadian-made vehicles, and the government estimates the rebates could result in an additional 840,000 new EVs hitting the road.

The motivations behind the series of measures announced Thursday, are to make the Canadian auto industry both less reliant on gas-powered vehicles, but also less dependent on the United States.

EV mandate replaced

In alignment with these motivations, the Liberals have heeded calls from the auto industry and political critics to do away with the Trudeau-era EV sales mandate that targeted having EVs account for 100 per cent of Canadian sales by 2035.

Carney’s government is repealing the EV availability standard – which has been on pause since September – and in its place, introducing a new greenhouse gas emission standard for vehicle models years 2027-2032. By 2035, the aim is to have 75 per cent of vehicle sales be EVs, and 90 per cent by 2040 by motivating automakers to make more zero-emission models.

This shift is to “rationalise emissions reduction policies to focus on outcomes that matter to Canadians,” according to officials from the federal transport, environment, and economic development departments who briefed reporters on a not-for-attribution basis on Thursday morning.

Though, when asked repeatedly, those same officials could not say exactly what impact these measures will have on Canada’s overall emissions.

When asked about how much carbon pollution could be eliminated, the prime minister said it was based on “grams per mile.”

“It’s a 57 per cent reduction in the emissions as this ramps up,” Carney said.

New auto worker support

The government is also installing new supports for auto workers through the industry’s transition period, with the aim of protecting jobs as the domestic sector tries to grow and diversify to new markets.

These include a new “work-sharing grant” to prevent layoffs, establishing a “workforce alliance” of industry, labour, and training partners. It will also provide employment assistance and reskilling funding for auto workers.

The sector currently supports more than 500,000 workers and contributes $16 billion annually to Canada’s GDP. Though, the ongoing Canada-U.S. trade war is threatening one of this country’s largest export industries and the jobs attached to it.

Currently, more than 90 per cent of Canadian-made vehicles and 60 per cent of Canadian-made parts are exported to the U.S. and the American tariffs are threatening 125,000 direct jobs.

And so, while noting automobiles may be the best symbol of how closely the Canadian American economies have been linked, Carney said he’ll maintain its 25 per cent counter-tariffs on auto imports from the United States to “ensure a level playing field.”

Rewarding Canadian-made

Behind the strategy is a commitment to allocate $3 billion from the “Strategic Response Fund” and $100 million from the “Regional Tariff Response Initiative” to help accelerate investments in Canada’s auto manufacturing sector.

With this funding, the government intends to identify Canadian suppliers and Canadian-made goods such as steel and aluminum that can be leveraged in the sector’s retooling efforts.

The federal plan also includes strengthening the national automotive remission framework to better reward companies that produce cars in Canada while requiring others to pay to access the Canadian market.

This change would see companies earn credits for investing in Canadian parts production or emerging technologies, as examples, while outside automakers looking to sell in the Canadian market would have to purchase credits.

The strategy also includes a few tax credits and incentives available to the sector, including a new “Productivity Super-Deduction,” that Carney said will “reduce Canada’s marginal effective tax rate on investment to 13 per cent. That’s more than four percentage points lower than in the United States.”

$1.5B for EV charging network

Noting that beyond affordability, range uncertainty and lacking availability of roadside chargers remain leading barriers to consumers making the switch to EVs, Carney’s strategy also promises $1.5 billion to improve the country’s EV charging network.

Flowing through the Canada Infrastructure Bank, the money will go towards “projects of national significance,” that would build out charging infrastructure more quickly across the country.

The prime minister said the motivation for putting more money into chargers, is to make it so plugging in your vehicle is as simple as stopping to fill your gas tank.

This funding is coming alongside a commitment to announce a new electricity strategy “in the coming weeks.”

Car dealers, automakers embrace changes

Noting the adjustments and additional measures are coming on the precipice of Canada entering talks towards renegotiating the Canada-United States-Mexico Agreement, the new strategy is being welcomed across the auto sector.

“This is a very welcome step for Canada’s automotive industry. The industry was under great pressure because of U.S. tariffs, and this EV mandate was redundant and putting significant cost on auto manufacturers,” said Canadian Vehicle Manufacturers’ Association president Brian Kingston.

“So, this puts us on a path to greater electrification, while giving industry the flexibility it needs during a very difficult time for the economy and for the sector.”

Canadian Automobile Dealers Association (CADA) said Carney deciding to repeal the Electric Vehicle Availability Standard demonstrates the government is willing to respond to market realities and consumer demand.

“Dealers have invested heavily in EV infrastructure to sell and service EVs in Canada. Consumer choice in terms of vehicle options for low emission choices has expanded dramatically in Canada, and now manufacturers have the ability to deliver emissions solutions which are technologically neutral,” said CADA president Tim Reuss.

If implemented fully, the new strategy could unlock billions of dollars in new investments, according to the Canadian Charging Infrastructure Council (CCIC).

“A Canadian vehicle emissions standard that achieves 75 per cent EV sales by 2035 and 90 per cent EV sales by 2040 will be a major step toward achieving a globally competitive automotive sector, provided that appropriate regulations are finalized in 2026,” said CCIC president Travis Allan.

Opposition parties pump the brakes

Both the federal Conservatives and New Democrats expressed reservations Thursday about the plan the prime minister presented.

“This will have almost zero benefit for Canadian auto workers and manufacturers,” said Conservative industry critic Raquel Dancho.

“Today’s announcement comes at a time when 5,000 Canadian auto sector jobs have been lost, including 3,000 at Stellantis, 500 directly at GM’s plant in Oshawa, and 725 at Paccar,” she said.

Dancho also expressed concern that taxpayers would be subsidizing foreign-made EVs.

Interim NDP leader Don Davies said his mind turned to the Canadian autoworkers that have already been laid off and criticized the Liberals for “erratic” policy decisions that he said have added to the sectors’ uncertainties.

And while he said New Democrats welcomed the return of an EV rebate, Davies also took aim at Carney weakening environmental targets.

“I don’t know how anybody could call themselves a leader on the climate with a record like this,” Davies said.