While car companies have vowed to continue the shift to electric, an industry expert said Canada’s zero-emission vehicle (ZEV) mandate requiring 100 per cent of new cars sold to be electric by 2035 – and 20 per cent by 2026 – might not be realistic.
“We’re definitely going to see more electrified powertrains in the future,” said Robert Karwel, a senior manager at J.D. Power’s Canadian office. “It’s just going to take longer than I think the government would like.”
The ZEV mandate’s first target is coming up fast. For the 2026 model year, 20 per cent of new cars that companies sell in Canada must be full battery-electric vehicles (BEVs), hydrogen fuel-cell vehicles (HFEVs) or plug-in hybrid electric vehicles (PHEVs), or car companies will face penalties.
“Are we going to hit our 20-per-cent mandate as an industry?” Karwel asked. “The simple answer is no, we’re not.”
EV owners increasingly looking to switch back to gas, discouraged by cost and lack of charging
By the third quarter of 2024, BEVs accounted for, on average, 7.1 per cent of the powertrain mix for car companies that sell both EVs and gas-powered vehicles. PHEVs accounted for another 4.3 per cent, for a combined tally of 11.4 per cent. (HFEV sales are minuscule).
“So let’s say we end the year at maybe an 11.75-per-cent share [of BEV and PHEV combined],” Karwel said. “We’re already in the 2025 model year – so that 11.75 per cent has to be 20 per cent within one model year. That’s impossible.”
These numbers are different than the industry average because they don’t include cars sold by companies, including Tesla, Lucid and Rivian, that only sell EVs. Those companies don’t need to worry about the mandate because they’re already at 100 per cent, Karwel said.
The rules allow a “grace period and some leeway,” but to avoid paying penalties, some car companies may limit the number of gas-powered vehicles they sell, Karwel said.
EV sales still rising
Yet, EV sales are still growing, albeit more slowly than some car companies had hoped. Industry analyst S&P Global Mobility expects BEVs and PHEVs to hit 15.2 per cent of all Canadian sales in 2024, 19 per cent in 2025 and 25.3 per cent in 2026.
“It was weird because the press really started getting down on EVs in the first quarter of the year, and it’s like, ‘Guys, it’s slowing down – it hasn’t reversed,’” Karwel said, adding that a slowdown wasn’t unexpected as the market begins to shift from early adopters to mainstream buyers. “EVs are still kind of a frontier technology for mainstream buyers,” Karwel said. “It’s going to take a lot of time. And I base that assessment simply off the price proposition – they’re a lot more expensive,” as much as $20,000 more than a comparable gas car.
While the mandate requires companies to slowly reduce the proportion of PHEVs making up its zero-emissions fleet (they’ll be capped at 20 per cent of a company’s EV output by 2029), Karwel doesn’t think PHEVs will significantly help companies meet the overall mandate.
“I’m a little bit more skeptical of PHEVs being what consumers will really go for in our marketplace because they’re priced a lot closer to full electrics [than gas-powered cars and traditional hybrids],” Karwel said. “I think, as a customer, if you’re going to go PHEV, then you probably don’t need much inducement just to go full electric.”
In fact, the fastest-growing market segment for the past five years has been conventional hybrids – which don’t count as EVs under the mandate because, unlike PHEVs, they generally aren’t capable of driving at normal speeds without producing tailpipe emissions. Conventional have grown to nearly 11 per cent of the market from 2 per cent in 2019 – largely because they’re much closer in price to gas models, Karwel said.
Aligning with the U.S.?
Automakers have already invested hundreds of billions of dollars in North America building battery and EV assembly plants, and don’t need Canada’s sales mandate to spur them to move any faster, said Brian Kingston, chief executive officer of the Canadian Vehicle Manufacturers’ Association (CVMA).
“The industry is moving toward electrification and massive investments have been made,” Kingston said. “So this transition is happening. The only question mark is: At what pace will it occur? And that ultimately comes down to consumer demand.”
Ottawa should consider eliminating the sales mandate, Kingston said, because the United States, our biggest trading partner, doesn’t have one. U.S. President-elect Donald Trump had been skeptical of EVs – although his stance has softened since he received backing from Tesla boss Elon Musk.
But Kingston worries that our mandate could irritate Trump and be an excuse for tariffs.
“It’s critically important that Canada aligns itself with the U.S.,” Kingston said. “We’ve got to look at the broader picture here, which is potential protectionist measures coming out of the United States … so things like our ZEV mandate are going to stand out.”
Under the Biden administration, the U.S. Environmental Protection Agency (EPA) introduced stringent tailpipe emissions standards that Trump has proposed rolling back – although automakers have asked him not to.
Although the EPA rules don’t require car companies to sell a specific percentage of EVs, they do require companies to cut tailpipe emissions over all. To meet the emissions standards, just over half of new cars sold in the United States would have to be fully electric by 2032.
If the United States does weaken its emissions standards, then Canada’s ZEV mandate might not make sense for car companies here because we’re a much smaller market, Karwel said.
“It probably makes more sense to harmonize with the U.S. because our auto markets are so closely linked – the bulk of what [manufacturers build in Canada] is exported to the U.S.,” Karwel said. “But it’s also with the caveat that when government keeps changing rules, that’s kind of hard to plan for. And vehicle development takes years, many years – you can’t stop things on a dime and alter trajectory.”
Protecting investment?
If the United States does roll back its emissions rules, Canada’s ZEV mandate could protect investments in electrification that companies have already made here because it shows that we’re committed to EVs, an environmental expert said.
“It’s crucial to have this [mandate] because it aligns us with California and other progressive states that have pledged to have stronger pollution standards for vehicles than the U.S. federal government,” said Nate Wallace, program manager of clean transportation at Environmental Defence Canada, a non-profit with offices in Ottawa and Toronto. “It also aligns us with other jurisdictions like the European Union. That underpins the business case for all these battery plants that we’re investing in.”
The mandate should also spur companies to find ways to make BEVs more affordable, Wallace said.
Left on their own, companies would keep selling bigger, more expensive vehicles that make them bigger profits.
“[The ZEV mandate] absolutely makes sense because legacy automakers have not acted to bring affordable EVs to market,” said Tom Green, a senior climate policy adviser with the David Suzuki Foundation, a Vancouver-based non-profit.
Then there’s the environmental impact. Canada’s ZEV mandate is expected to reduce carbon pollution by 362 million tonnes by 2050, Wallace said.
“The amount of gasoline you prevent being burned is enough to fill 62,000 Olympic-size swimming pools … and we’re talking about reducing air pollution so much that over the next 25 years you prevent 11,000 [pollution-related] premature deaths in Canada,” Wallace said. “So in a world where we don’t have the U.S. standards, which is the likely world that we’re going to be living in because of Trump, we need our own rules.”
Federal Conservative Party Leader Pierre Poilievre has not said whether he would consider scrapping the ZEV mandate if a Conservative government were to be elected. Poilievre’s office didn’t immediately respond to a request for comment.