Canada's EV Mandate Forces Billions in Payments to Tesla

Tesla vehicles at a dealership in Toronto. The federal government’s electric vehicle mandate is a classic case of central planning gone haywire, John Ivison writes. Photo by Peter J. Thompson/National Post

“We are not banning vehicles that use gasoline, we are responding to the market. We are responding to Canadians.”

Those were the words of Wade Grant, the parliamentary secretary to the environment minister, Julie Dabrusin, speaking to a Conservative motion on the government’s electric vehicle mandate in the House of Commons in June.

In reality, if the Liberals were responding to the market, they would scrap the mandate that will require 20 per cent of all cars sold in Canada next year to be electric vehicles.

The reason is that EV sales have fallen for five months in a row and accounted for just 7.9 per cent of new vehicles sold in Canada in June.

The forecast for this year is that EV sales will hit 9.7 per cent of sales, or 180,000 units.

Car makers that don’t hit the government’s arbitrary 20 per cent target — which is all of them except Tesla — will have to buy credits from, you guessed it, Tesla to comply with the regulation.

Elon Musk’s company, which does not manufacture in Canada, recorded regulatory credit sales of nearly US$3 billion in 2024/25, according to its financial statements.

Brian Kingston, president of the Canadian Vehicle Manufacturer’s Association (CVMA), estimates that buying credits to hit the 20 per cent target would cost car companies $3 billion in 2026, on top of the hundreds of millions of dollars they are paying in U.S. President Donald Trump’s tariffs. (Canadian automakers are subject to a 25 per cent American tariff but can subtract U.S. content from the applied rate, meaning most manufacturers pay an effective tariff of 10 to 12.5 per cent. In ballpark figures, on sales of $4 billion in exports, that is a further $400 million.)

The only other option to buying credits is to cut the production of gas-powered cars by up to 900,000 units.

Either outcome is likely to result in more unemployment, to add to the 56,600 full-time manufacturing job losses that were recorded in Ontario in the second quarter of this year.

It is a classic case of central planning gone haywire that many people thought they had seen the back of when Justin Trudeau left office.

The government came up with an arbitrary target and has since used subsidies and taxpayer-funded incentives to hit it.

As deputy Conservative leader Melissa Lantsman said in the debate in the House in June, “the Liberals think they can control someone’s life better than they can; that they make decisions better than Canadians can for themselves and we get significantly worse outcomes.”

The mandate was introduced by then environment minister Steven Guilbeault in 2022 as a way to reduce auto emissions. The plan was to require 20 per cent of all car sales to be electric (or plug-in hybrid) by 2026, rising to 60 per cent in 2030 and 100 per cent by 2035.

In 2024, EV sales hit 13.8 per cent of total cars sold, according to Statistics Canada, buoyed by a federal incentive program that provided up to $5,000 for EV buyers, and even richer provincial schemes, such as Quebec’s Roulez vert program that offered up to $7,000.

However, the federal program was cancelled in January and the Quebec incentive has dropped to $4,000 this year and $2,000 next. (The province accounts for more than half of all EV sales in Canada.)

The result is that sales have tumbled and the industry says there is “no pathway” to hitting the 20 per cent target.

Grant told the House in June that during the last election campaign, the Liberals committed to reintroducing a purchase incentive of up to $5,000. However, the CVMA points out that it would cost $900 million to incentivize the 182,000 sales it is anticipated would be required to hit the 20 per cent target.

Mark Carney has been bequeathed a real mess by his predecessor but there are no signs that the government is considering a retreat, as it did on the carbon tax.

In the House in June, the parliamentary secretary ignored the market reality by suggesting that EV sales are continuing to grow in Canada and around the world. “That is not a political talking point, that is a market reality,” he said.

Except it isn’t. True, EV sales globally are still rising, but that is largely because the Chinese are determined to flood the world with low-cost vehicles.

The Liberals could likely hit their environmental targets in short order if they allowed $20,000 BYD electric vehicles into the Canadian market tariff-free. Instead, the government imposed a 100 per cent surtax on Chinese cars to protect the home market.

Grant said the government does not want to force Canadians to buy electric vehicles but it wants “to build the cars of tomorrow.” The Liberals are all in on EVs, having provided support to manufacturers estimated at around $31.5 billion by the Parliamentary Budget Office (the provinces have contributed a further $21.5 billion, the PBO said in June 2024).

The government has spent a further $1.1 billion through the Canada Infrastructure Bank on public charging stations. “We are working across the entire ZEV (zero-emission vehicle) value chain,” Grant said.

There’s no doubt that electric vehicles are here to stay, as anyone who has travelled to countries without a 100 per cent tariff on Chinese cars can testify. The International Energy Agency reports that one-fifth of all car sales globally are now EVs.

It would be lunacy for Canada to adopt Trump’s stance that “the electric vehicle hoax” is the result of a conspiracy of “radical left fascists, Marxists and communists” and to rule that automakers no longer need to measure or control emissions.

But if the Liberal government is really “responding to the market,” as Grant says it is, it has to adopt a more common-sense, flexible policy that recognizes the reality that high purchase prices have dampened demand. Preferably it comes up with a policy that does not line the pockets of the world’s richest man with cash for credits that have the intrinsic worth of a defunct deutschemark.