Carney reinstates EV buyer incentives, scraps sales mandate

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Prime Minister Mark Carney unveiled Ottawa’s plan to bolster the automotive sector and reduce greenhouse gas emissions on Thursday, announcing incentives to buy electric vehicles and a proposal to use credits to encourage domestic manufacturing.

The changes, which include the elimination of EV sales mandates and the introduction of new investments in an EV charging network, are the main planks in the federal government’s efforts to support Canada’s auto industry and spur electrification at a time of trade upheaval.

Mr. Carney said the measures include direct support and tax incentives for businesses that will encourage domestic manufacturing while motivating consumers to purchase zero-emissions vehicles.

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The announcement at an auto-parts factory owned by Martinrea International Inc. in Vaughan, Ont., comes 10 months after U.S. President Donald Trump applied 25-per-cent tariffs on the non-U.S. content of Canadian-made cars, declaring the U.S. doesn’t need them.

Mr. Carney said Canada is considering imposing a system of tradeable credits on automakers to reward companies that manufacture in Canada and penalize those that do not.

Carmakers that manufacture or invest in Canada would earn credits for doing so. Car companies that want to import cars to Canada tariff-free without a manufacturing plant here would have to purchase these credits.

Mr. Carney says Canada’s position at the upcoming review of the United States-Mexico-Canada Agreement on free trade is that cars should move across the border free of duties.

“But if the U.S. through the [USMCA] review insists on some form of auto tariffs, we’ll ensure that companies that sell vehicles in Canada are strongly incentivized to produce in Canada,” he said.

Under the plan announced on Thursday, Mr. Carney said Ottawa will:

• Introduce tougher emission standards for car model years 2027-32. The goal is to make EVs 75 per cent of sales by 2035 and 90 per cent by 2040.
• Reinstate the EV subsidies for consumers of up to $5,000 for battery electric and fuel EVs, and up to $2,500 for plug-in hybrids (PHEVs) with a sales price of up to $50,000. The subsidies only apply to cars made in countries with which Canada has a free-trade deal. For Canadian-made EVs and PHEVs, there is no price cap.
• Spend $1.5-billion on new EV charging infrastructure.
• Spend up to $3.1-billion to help the auto industry grow and diversify to new markets.
• For autoworkers, introduce worksharing to reduce layoffs and new training initiatives.

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Mr. Carney told reporters he is making the moves at a “pivotal” point in the country’s history.

The benefits of the new program will be felt through the entire supply chain, he said, “irrespective of the outcome of the tariff discussions.”

The sweeping announcement was welcomed by the auto industry, which had fought the EV mandates as it struggles with the tariff burdens and questions over the future of North American free trade.

Rob Wildeboer, executive chairman and co-founder of Martinrea, told The Globe and Mail the policy changes are an “affirmation of the importance of a critical industry.”

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“It’s really good to see that our federal government and our provincial government recognize that we need advanced manufacturing and we have to support our key industries,” Mr. Wildeboer said.

Mr. Carney on Thursday officially scrapped the EV sales mandate that gradually phased out internal combustion engines.

The system, which required carmakers to purchase credits if they fell short of targets, was opposed by the auto industry as costly at a time when consumers are slow to make the switch to emissions-free cars.

The loss of the EV sales mandate was criticized by environmental groups as a step backward.

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“While the rest of the world advances on EV manufacturing, affordability and availability, Canada continues to lag behind, dragged by big automakers that prioritize SUVs and other gas cars with big margins,” Environmental Defence said in a statement.

Governments and businesses in Canada have spent billions building an EV supply chain. But the tariff war with the U.S. and slowing demand for the vehicles has cast some of those investments in doubt.

Gal Raz, a professor at Western University and EV researcher, said the new push in Canada for EVs could go a long way toward reinvigorating the sector, and justifying the investments. Mr. Carney’s announcement addresses two key hurdles to widespread EV adoption, he said: affordability and access to charging stations and other infrastructure.

As to whether Canada should join the rest of the world in pursuing an EV industry at a time when the U.S. is erecting tariff barriers and eroding emissions standards, he said, “Yes, we have no choice.”