Same, but Less: Prime Minister Carney Announces New EV Rebate and Auto Sector Strategy

• On February 5th, Prime Minister Carney and Industry Minister Melanie Joly announced a revised strategy aimed at decarbonizing the transportation sector and supporting Canada's fledgling EV manufacturing industry. Many of the measures announced were similar to what was in place under Trudeau, but simply less stringent and/or less generous versions of those previous policies.
• The government plans to repeal the Electricity Vehicle Availability Standard (aka the EV sales mandate), which would have required zero-emission vehicles (ZEVs) to comprise a rising share of light-duty vehicle sales, starting at 20% in 2026 and reaching 100% by 2035. 
• It will be replaced by new tailpipe emissions standards for model years 2027-2032. The government hopes the new standards will put the country on a trajectory to reach EV sales share of 75% by 2035 and 90% by 2040.
• To help bolster flagging EV sales, the government is introducing a new $2.3 billion EV rebate program which will be in place from 2026 to 2030. Eligibility will be restricted to vehicles that have a final transaction value of up to $50,000 and are produced in countries that have a free trade agreement with Canada, while Canadian-manufactured vehicles will be exempt from the price cap.
• The maximum rebate for battery electric and fuel cell electric vehicles starts at $5,000 in 2026 and will decline each year, reaching $2,000 by 2030. For plug-in hybrids, the rebate starts at $2,500 and will drop to $1,000 by 2030.
• The government will also invest $1.5 billion in the Canada Infrastructure Bank's Charging and Hydrogen Refueling Infrastructure Initiative to support expanding EV charging infrastructure across the country.
• Measures targeted at the auto manufacturing sector include continued tariff relief on U.S. auto imports for manufacturers that produce in Canada and plans to spend $3 billion from the Strategic Response Fund and up to $100 million from the Regional Tariff Response Initiative to support the industry to grow and expand to new markets.
• To support auto workers, the government will introduce a new work-sharing grant to reduce layoffs and will also invest $570 million in reskilling up to 66,000 workers, including laid off auto workers.

The Strategy in Context

• For context, many of the actions taken today are simply lesser continuations of what would have been in place under former Prime Minister Trudeau. The less generous rebate program, investments in charging infrastructure, clean investment tax credits to support EV and battery manufacturing are all holdouts from supports for the 2030 Emissions Reduction Plan. The Productivity Super-Deduction touted by Carney was announced in the Fall Economic Statement prior to the 2025 election and was mostly re-branded and included in his first Budget.
• Even the vague "doubling of the stringency of Canada's GHG emissions standards by 2035" would have been already in motion prior to this announcement. Canada aligned its tailpipe emissions standards with those introduced under President Biden several years ago when he had announced a 100% EV sales target by 2035 and revised EPA standards to support that objective. President Trump rescinded that regulation last year, while Canada did not.
• The details of the rebate program also leave much to be desired. The declining nature of the rebate itself is likely aimed at reducing the price differential between ZEVs and internal combustion engine (ICE) vehicles, but implicitly anticipates that the differential will fall over time due to increased competition (from China, Korea and others with whom Canada has recently grown its trade relationship with) and a growing domestic industry. This is not a given. Canada has lost several high-profile investments in the EV & battery manufacturing space in the last year. These might return as global trade reorients, but the length of time in which it tends to take foreign investment to bear fruit in Canada, and the rapid fall in the EV rebate, may stymie any progress made on increasing sales.

What does this all mean for Canada?

• Sales of ZEVs fell in 2025 following the end of the federal and some of the provincial EV rebate programs. In 2025, ZEVs comprised 8.6% of new light-duty vehicles sales (as of November), down from around 14% in 2024. The reintroduction of the federal rebate program is likely to boost sales, but not by much and especially in the later years of the program when the subsidy amount will be smaller. As well, the final transaction value cap of $50,000 substantially limits the number of vehicle models that will be eligible for the program. In addition, for much of the last several years, EV adoption in Canada was largely driven by Quebec and British Columbia, both of which had provincial incentives that were additive to the federal one. However, the British Columbia program ended in 2025 while Quebec's program is in its last year.
• The government also recently announced that it will be lowering tariffs on Chinese-made EVs from 100% to 6% but only for 49,000 vehicles per year initially, which will increase to 70,000 over five years. Depending on how affordable the vehicles that do eventually make it to Canada will be (as they will not be eligible for the federal rebate), they may also provide limited support to increasing EV adoption. 
• From an emissions perspective, on-road transportation accounted for 17.5% of Canada's greenhouse gas emissions in 2023, two-thirds of which came from light-duty vehicles. Little information was available as to how the increased stringency of tailpipe emissions would impact the total, but reaching 75% EV sales by 2035 provides some guidepost. The lower sales target, combined with the elimination of the federal fuel charge, and possibly less stringent tailpipe emissions standards raises further questions about Canada reaching its interim 2030 emissions reduction target. At best, incremental progress can be expected, likely offset, however, by developments in oil & gas production and other areas currently in focus for this government. 
• For the auto industry, much will depend on how other countries respond to Carney's invitation to collaborate more deeply and how foreign multinationals respond to Canada's investment support regime.  

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