The federal government’s mandate requires 20 per cent EV sales in the 2026 model year.Sean Kilpatrick/The Canadian Press
Brian Kingston is president and chief executive of the Canadian Vehicle Manufacturers’ Association.
Canada’s auto industry faces two existential threats: U.S. protectionism and electric vehicle mandates here at home. How these threats are managed will determine the future of the industry in Canada and the hundreds of thousands of livelihoods that depend on it.
On April 3, 2025, the United States placed a 25-per-cent tariff on automobile imports, including vehicles built in Canada. In response, the Canadian government matched the tariffs on U.S. vehicles.
With approximately 90 per cent of Canada’s automotive production destined for the United States, tariffs of any level are highly damaging to the industry and consumers on both sides of the border. Given the importance of the auto industry to Canada’s economy – responsible for more than 130,000 direct manufacturing jobs – urgently securing an agreement with the United States to eliminate these tariffs must be the government’s top priority.
But this is not something within Canada’s control. And the Prime Minister has said that in the face of a changing global landscape we must focus on what we can control.
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Unlike securing a trade agreement with the United States, EV mandates are at the discretion of federal and provincial governments.
Canadian federal and provincial government EV mandates dictate aggressive and unrealistic sales in Canada. These mandates are so detached from market realities they could destroy the industry before a trade deal is struck with our American partners. The federal government’s mandate requires 20 per cent EV sales in the 2026 model year, which is now. Mandates in Quebec and British Columbia are even more extreme requiring 32.5 per cent and 26.3 per cent EV sales in model year 2026, respectively.
With EV sales falling for five months in a row, sitting at just 7.9 per cent of vehicles sold in June, there is no pathway to meeting government mandated target. Federal ministers publicly musing about reinstating the EV purchase incentive program have only worsened the situation as would-be EV buyers wait for details on a funding program that may or may not materialize.
Canadians are clearly not ready for widespread EV adoption. The pace of EV sales should be driven by the consumers willingness to make the transition, not government mandates.
The current industry forecast for 2025 is 9.7 per cent EV sales, representing 179,839 vehicles. To meet the governments 20 per cent mandated target for 2026, EV sales need to grow by more than 100 per cent or 182,355 vehicles.
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Even if government were to reintroduce an EV purchase incentive, there is simply no way to close a gap of this size. This leaves automakers with two compliance options, purchase credits from companies such as Tesla or restrict gas-powered and hybrid vehicle sales to comply with the mandated EV to gas-powered vehicle ratio.
Credit purchases put a financial burden on companies at the exact moment they are incurring billions of dollars in tariff costs. Assuming a cost per credit of $20,000 (the price government established in the regulation), complying with the EV mandate could cost automakers more than $3-billion in 2026.
The other compliance pathway is through restrictions on gas-powered and hybrid vehicle sales to Canadians. At current sales rates, automakers will need to pull between 700,000 to 900,000 gas-powered and hybrid vehicle sales from the Canadian market starting this year.
The results will be dire for Canadian consumers and the economy. Vehicle inventories will plummet, prices will rise, dealerships will be put out of business and auto plants will close.
Instead of mandating what type of vehicles Canadians buy, government efforts should focus on boosting consumer demand and leading by example. Building a national EV charging network is a good place to start.
According to Natural Resources Canada, Canada needs 100,500 public charging ports in 2025 to support higher EV adoption. Today there are only 35,863 chargers available, a gap of 64,637 chargers. At the current charger installation rate of approximately 7,000 chargers a year, the charging gap only grows with 234,500 chargers needed in 2030, 446,800 in 2035 and 678,600 by 2040.
Canada’s automotive future is on the line. Scrapping these mandates now is the fastest way to relieve pressure on the industry and keep it competitive in the face of rising protectionism.