Canada softens its EV mandate, restores purchase rebates

The Canadian government has announced it will scrap hard electric vehicle (EV) mandates requiring 60% of all new cars to be battery-electric by 2030 and 100% by 2035, replacing them instead with stricter greenhouse gas emission standards targeting 75% electric sales by 2035 and 90% by 2040. Prime Minister Mark Carney simultaneously announced his government will restore consumer rebates of up to CA$4,000 (US$3,600) for pure EVs and CA$2,500 for plug-in hybrids (PHEVs) through a five-year programme.

The US$2.3bn EV Affordability Programme will offer rebates for vehicles costing up to CA$50,000 made by countries with which Canada has free trade agreements—this would exclude the 49,000 China-made EVS Canada recently announced could be imported at a reduced 6.1% duty. No cost cap will apply to zero-emission vehicles made in Canada. Rebates will decrease annually; CA$1,000 for EVs and CA$500 for PHEVs until the incentives return to zero in 2030. The government forecasts more than 840,000 zero-emission vehicles will be incentivised over the programme’s duration.

Carney announced the measures at an automotive parts factory near Toronto, remarking: “We must take care of ourselves […] We cannot control what others do.” He added “Canada is an auto nation, the auto industry is central to our story […] The auto industry is the core pillar of the Canadian economy.” The government will go beyond purchasing incentives, and invest CA$1.1bn to expand charging stations across the country through Canada Infrastructure Bank’s Charging and Hydrogen Refueling Infrastructure Initiative.

The strategy marks a noteworthy departure from the approaches in other major markets as the automotive sector navigates diverging regulatory frameworks. In the US, President Donald Trump’s administration has eliminated EV promotion policies including US$7,500 tax credits for new vehicle purchases, while the EU has largely maintained its transition path, despite making a caveat for PHEVs in its original 2035 internal combustion engine vehicle ban. Canada’s plan will also provide billions to help the auto industry adapt to changing markets, and reduce corporate tax rates for zero-emission technology manufacturers.

Trump has inflicted significant pain on Canada’s auto industry, which exports about 90% of its vehicles to the US, and currently imposes a 25% tariff on Canadian-made vehicles. US automakers are in the midst of an exodus following Trump pressure: last week, General Motors laid off about 700 workers at its pickup truck plant in Oshawa, Ontario, while Stellantis abandoned a partly subsidised plan to build a Jeep model at a factory in Brampton and moved production to Illinois. The government will provide CA$570m in employment assistance for the up to 66,000 workers whose jobs have been affected by US tariffs and other market changes.

EV sales fell sharply in Canada after the previous rebate programme ended in January 2025, with Canadians registering just 45,366 EVs and PHEVs in the third quarter of 2025 compared with 75,788 a year earlier. The automotive sector employs about 125,000 workers in Canada, with assembly and parts manufacturing based almost entirely in Ontario.