Amid tariffs and falling sales, is Canada’s EV mandate doomed?

With U.S. tariffs on steel, aluminum, and light-duty vehicles continuing to have a detrimental impact on the Canadian automobile industry, the CEOs of Canada’s big three automakers are seeking relief. They recently met with Prime Minister Mark Carney to advocate for the elimination of the Liberal government’s zero-emission vehicle (ZEV) mandate. They argue that maintaining the mandate will severely harm their companies and jeopardize thousands of jobs.

Carney, who recently cancelled Canada’s digital services tax to facilitate trade negotiations with the U.S., is now facing pressure to reconsider the ZEV mandate. The mandate stipulates that the number of new ZEVs sold in Canada must reach 20 per cent by next year, 60 per cent by 2030, and 100 per cent by 2035 to help the country achieve its emission-reduction targets.

Brian Kingston, president and CEO of the Canadian Vehicle Manufacturers’ Association, emphasized that the electric vehicle mandate is unfeasible in its current form. The ongoing U.S. tariffs have significantly reduced the number of vehicles Canada exports, placing immense strain on the industry. According to Statistics Canada, the number of light-duty vehicles exported to the U.S. in April declined by 23 per cent compared to the previous year.

Flavio Volpe, the president of the Automotive Parts Manufacturers’ Association, highlighted that Canada imports approximately $80 billion worth of automobiles and parts from the U.S. annually, with about 85 per cent of the light-duty vehicles produced in Canada being exported. Unfortunately, the market for plug-in hybrids or electric vehicles in both Canada and the U.S. is dwindling.

In January, U.S. President Donald Trump eliminated his country’s ZEV mandate, which would have required half of all new vehicles to be electric by 2030. This move, coupled with the termination of the $7,500 electric vehicle tax credit, has further impacted the U.S. ZEV market. While Canada had its own ZEV rebate program offering up to $5,000 for new electric cars and plug-in hybrids, it was paused in January due to funding constraints.

As a result, the sale of zero-emission vehicles in Canada has dropped to 7.5 per cent, representing a 28.5 per cent decline from April 2024. With exports and sales declining, manufacturers are struggling to meet the 20 per cent target set for next year. The industry is urging the government to reconsider the ZEV mandate and provide support to boost demand for electric vehicles.

Christopher Cochrane, chair of the University of Toronto’s political science department, acknowledged the challenges Carney faces in balancing environmental goals with economic concerns. While there may be pressure to end the EV mandate, Cochrane emphasized the importance of maintaining a cohesive approach within the government.

Adam Chamberlin, an assistant professor at the University of Ottawa, suggested that Carney may opt for a gradual adjustment of the ZEV mandate rather than a complete elimination. This approach would provide flexibility while addressing the industry’s immediate needs.

Flavio Volpe emphasized the importance of Canada continuing its march towards electrification, despite the U.S. abandoning its EV ambitions. He called for adjustments to the ZEV mandate to align with market realities and recommended expanding the EV rebate program to include conventional hybrids. Additionally, Volpe urged the government to assist in identifying the electric vehicles in demand and supporting factories in retooling to meet consumer needs.

In conclusion, while the Canadian auto industry grapples with the challenges posed by the trade war and declining demand for electric vehicles, there is a growing consensus on the need for strategic interventions to support the sector’s sustainability and growth. Carney faces a delicate balancing act in addressing competing interests, but proactive measures could help alleviate the industry’s current woes and pave the way for a more resilient automotive sector.