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With U.S. tariffs on steel, aluminum and light-duty vehicles continuing to batter the Canadian automobile industry, the CEOs of Canada’s big three automakers are asking for a break.
They met with Prime Minister Mark Carney this week to lobby for the elimination of the Liberal government’s zero-emission vehicle (ZEV) mandate. Maintaining it, they say, will cripple their companies and put thousands of jobs at risk.
Carney cancelled Canada’s digital services tax last weekend to keep trade negotiations going with the U.S. Could the ZEV mandate also be removed to help an auto industry bleeding from the trade war? And what would that mean for Carney politically if he did so?
The mandate requires the number of new ZEVs sold in Canada to hit 20 per cent by next year, 60 per cent by 2030 and 100 per cent by 2035 in order to help the country hit its emission-reduction targets.
Brian Kingston, president and CEO of the Canadian Vehicle Manufacturers’ Association, who was at the meeting with Carney, said the electric vehicle mandate just can’t be met as it stands.
Kingston and other industry players say U.S. tariffs have led to a significant drop in the number of vehicles Canada exports, putting immense pressure on the industry.
According to Statistics Canada, the number of light-duty vehicles exported to the U.S. in April was down 23 per cent over the previous year.
Flavio Volpe, the president of Automotive Parts Manufacturers’ Association, told CBC News that while Canada imports about $80 billion worth of automobiles and parts from the U.S. each year, it exports about 85 per cent of the light-duty vehicles that roll off the line.
Many of those are plug-in hybrids or electric, but the market for those vehicles in the U.S. is declining just as it is in Canada.
Killing the U.S. ZEV mandate
In January, U.S. President Donald Trump eliminated his country’s ZEV mandate that would have required half of all new vehicles to be electric by 2030. A White House statement said the mandate was scrapped in order to “promote consumer choice.”
The passage of Trump’s “big, beautiful bill” further hit the U.S. ZEV market by killing the $7,500 electric vehicle tax credit by the end of September.
That credit was supposed to remain on the books until 2032.
Canada had its own ZEV rebate. That program offered up to $5,000 toward the purchase of a new electric car and up to $2,500 on the purchase of a new plug-in hybrid.
While it was supposed to stay in place until March, it was paused in January when it ran out of funding.
In April, the sale of zero-emission vehicles in Canada sat at only 7.5 per cent — a 28.5 per cent decline over April 2024.
With exports and sales down and no rebate in place, manufacturers say there is just not enough demand to hit the 20 per cent target next year.
Competing concerns
Christopher Cochrane, the chair of the University of Toronto’s political science department, says Carney is wedged between his environmental ambition and the need for an industrial policy that will keep people employed and protect the auto industry.
But if Carney decided he needed to end the EV mandate, Cochrane said, he might have a window of opportunity.
“He has a coalition of people built not on any particular agreement with him, but built on a common disagreement with what they see as the main alternative — and that did give him the policy leeway to do things like get rid of the carbon tax,” he said.
But he said it isn’t easy to navigate the environmental and economic concerns from within his own party.
“The risk, longer term, is that he starts to erode and blow up that coalition,” Cochrane said. “But right now I think he’s still in pretty good shape.”
Fudging it
Adam Chamberlin, an assistant professor in the Telfer School of Management at the University of Ottawa, said Carney likely doesn’t want to frame any decision as the end of EV mandates.
“So 2035 maybe becomes 2036 or 2037, and the other interim goals for 2030 become 2031 or 2032,” Chamberlin said. “I think it’s that kind of a fudge that we’re going to see.”
Volpe says that just because the U.S. wants to abandon its EV ambitions, that doesn’t mean Canada should follow suit.
He says an electrified car market plays to Canada’s strengths as a country with rich reserves of critical minerals, a sophisticated science and technology sector, a well-established supply chain and an ample supply of electricity.
Recent headlines have suggested that consumers are losing interest in electric vehicles, but a closer look at the trends tells a different story. CBC’s Nisha Patel breaks down where we’re at in the EV transition and why experts say the future is still electric.
“The rest of the world continues down the march [of electrification] undaunted,” Volpe said. “We need to make sure that as that [U.S.] market wakes up, we’re first ones to access it.”
Volpe says any penalties for not meeting the ZEV mandate should be halted and it should be adjusted to better line up with “market realities.”
He wants the federal government to reintroduce the EV rebate and expand it to include conventional hybrids, which he said would build support for EVs. The government said it plans to introduce a new rebate program, but that hasn’t happened yet.
Volpe also wants the federal government to help identify the electric cars that Canadians want, and help factories retool to meet that demand.