Internal government document predicted 'immediate' drop in EV sales without rebate subsidies

OTTAWA — An internal government document reveals there was awareness among some officials that Ottawa ending its electric vehicle subsidies in January would lead to an “immediate” hit to EV sales and market uncertainty, as it coincided with the United States’ rollback of its own electrification programs. 

The undated document prepared earlier this year by the deputy minister for innovation, science, and economic development, comes as automakers press Prime Minister Mark Carney’s government to reverse course on ambitious electric vehicle mandates as sales have sharply declined in recent months.

“While many of Canada’s (electric vehicle) and battery manufacturing projects continue to progress as planned, the slowdown in growth has contributed to delays, modifications, or scaling back of planned investments,” says the partially redacted document, released to National Post under federal access-to-information legislation.

Elsewhere, it said that, without the EV subsidies, consumers would be drawn “to more affordable internal combustion and hybrid options.”

It outlines how slowing sales have been impacting electric vehicle and battery manufacturing projects in Ontario and Quebec, for which the federal government and some provinces had pledged billions of dollars in support.

“In the long-term these impacts on their own are unlikely to jeopardize the prosperity of the automotive sector in Canada, but they depend on the electrification plans of the manufacturer and the health of the sector overall, including on the impact of potential U.S. policies and tariffs.”

The mandates imposed under previous prime minister Justin Trudeau require 20 per cent of all passenger car sales next year to be zero-emission (electric, plug-in hybrid or hydrogen-powered) and 100 per cent by 2035. In the first quarter of this year, Statistics Canada recorded zero-emission vehicle sales in Canada representing 8.7 per cent of new vehicle registrations, down 23 per cent from the previous year.

Ottawa has faced scrutiny for its messaging after the rebate for consumers ended in January. It has said that work is underway for a new incentive, with no timeline announced.

“What do you think that creates in the marketplace?” said Tim Reuss, president and CEO of the Canadian Automobile Dealers Association, which represents car and truck dealers across the country. 

“Well, everybody holds off on buying a car because they know that some incentive is coming, right? So we’re starting to feel that … that is just not very helpful.”

Automakers say what they consider unrealistic targets pile extra pressure onto the sector amid a trade war launched by U.S. President Donald Trump, who has taken direct aim at Canada’s auto sector .

The government document also assesses the impact of Trump’s decisions to scrap previous U.S. electric vehicle policies, such as the 2030 mandate introduced under his predecessor, former president Joe Biden, as well as subsidies for battery-electric vehicles.

It also touched on the impact that axing consumer incentives would have on the situation in both Canada and the U.S.

“Recent executive orders issued by President Trump, which intend to eliminate consumer supports for (battery electric vehicles), combined with the pause of Canada’s incentives for zero-emission vehicles (iZEV) program have added uncertainty to the market,” it reads.

“In particular, the intended removal of consumer supports in both countries will have an immediate negative impact on sales growth in 2025 as these initiatives make the price of (battery electric vehicles) competitive to their internal combustion counterparts,” it says elsewhere in the document.

The document warned the timelines for achieving price parity between battery-electric vehicles and traditional ones “could further shift” as a result of Trump’s policies.

A statement from Industry Minister Melanie Joly’s office said it is working with the sector in response to the challenges. “With unjustified US tariffs putting the entire industry at risk, the government recognizes the sector’s concerns and is continuing to engage meaningfully with industry stakeholders to address and alleviate these challenges,” the ministry wrote.

The federal government announced back in January that it was hitting “pause” on its $5,000 rebate program more than two months earlier than scheduled, saying the funding for that program had dried up.

It had launched the incentive in 2019 as a way to bring down the price of electric vehicles, which proponents of the policy say is needed to encourage more widespread adoption, blaming the abrupt cancellation for the drop in sales.

Brian Kingston, p resident and CEO of the Canadian Vehicle Manufacturers’ Association, which represents Ford, General Motors and Stellantis, said while the industry wants the EV mandate gone, it also needs clarity on what the government intends to do when it comes to reintroducing a new rebate. 

“The lack of clarity is further damaging sales,” he said.

“If you are bringing it back, you have to announce it with a very defined timeline, and you can’t say that we’re going to bring the … program back in six months. Because unfortunately, that means you then delay the purchase of these vehicles for another six months.”

“We are looking at ways to reintroduce a purchase incentive worth up to $5,000 that supports Canadian workers, strengthens our domestic supply chains, and reflects the times we are in,” wrote Ministry of Transport spokesperson Laura Scaffidi in an email.

National Post

staylor@postmedia.com

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