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Automotive

Ottawa’s EV mandate may destroy Canadian auto industry

Published

1 year ago

8 minute read

From the Fraser Institute

By Ross McKitrick

No one had to force the public to abandon land lines for cellphones, or vinyl records for CDs and then online streaming. When superior products appear, people will switch voluntarily. An EV mandate may be affordable by 2035—but only if the product quality and user costs have progressed to the point that people want to switch anyway, in which case the mandate is not needed.

According to energy transition and “net zero” enthusiasts, the future looks bright for electric vehicles (EVs). So bright that the federal government and some provincial governments have had to offer some $15 billion in subsidies to prompt carmakers to develop Canadian production facilities while also offering lavish subsidies to get people to buy EVs. And since even that isn’t enough, according to a Trudeau government mandate, all new light-duty vehicles sold in Canada must be electric or plug-in hybrid by 2035. In other words, the government wants to ban traditional internal combustion engine vehicles (ICEVs).

The fundamental problem is that EVs cost more to make and operate than most consumers are willing to pay. In a 2016 submission to the Quebec government, which was then considering an EV mandate of its own, the Canadian Vehicle Manufacturing Association warned that its members were then losing between $12,000 and $20,000 per EV sold. Since then, the situation has gotten worse, with Ford reporting first quarter 2024 losses of US$132,000 per EV.

What will be the economic consequences of a national EV mandate in Canada? In a new paper forthcoming in the peer-reviewed Canadian Journal of Economics, I develop and run a detailed inter-provincial model of the Canadian economy including the auto sector. I argue that during the phase-in period the auto sector will raise the price of ICEVs and earn above-market rents on them, but that won’t cover the losses on the EV side and the industry will go into overall losses by the late-2020s. The losses will be permanent unless and until EV production costs fall enough that a mandate is unnecessary. In short, the 2035 mandate is affordable only if it’s not needed. If it takes a mandate to force consumers to choose EVs over ICEVs, the mandate will destroy the Canadian auto industry.

The mandate sets up a race between regulation and technology. Some aspects of EV production are falling, such as batteries. Others, such as specialty metals used in motors, are sole-sourced from China and are not getting cheaper. Other user costs are rising including electricity, for which we can thank two decades of green energy madness. Taking all aspects together, suppose EV technology improves so quickly that by 2035 consumers are absolutely indifferent between an EV and an ICEV, so the mandate is costless thereafter. Getting to that point would still impose Canadian auto industry losses that total $140 billion compared to the no-policy base case. As of 2031 the losses in real GDP and industrial output compared to the base case would average more than $1,000 per worker across Canada. Greenhouse gas emissions would fall by just under 3 per cent relative to the base case as of 2035, but the abatement costs reach about $2,800 per tonne as of 2030.

That’s the best-case scenario. What if full EV cost parity takes until 2050? According to the model, the auto sector will lose $1.3 trillion relative to the base case between 2025 and 2050. Of course, in reality the sector would simply shut down, but in the model a sector must keep operating even at a loss. In absolute terms the national economy would continue to grow but much more slowly. Economic losses relative to the base case as of 2035 include a 4.8 per cent reduction in real GDP nationally (8.9 per cent in Ontario), a 2.6 per cent cut in real earnings per worker, 137,000 jobs lost, a 10.5 per cent drop in auto demand nationally and a 16.8 per cent drop in capital earnings relative to average. Greenhouse gas emissions would fall by just under 6 per cent against the base case as of 2035 but at a cost of more than $3,400 per tonne, 20 times the nominal carbon tax rate.

These are unprecedented costs, but then again we have never before proposed to ban the production and purchase of one of the most popular consumer products of all time. A large part of our economy is organized around making and using gasoline-powered cars, so if the government plans to outlaw them we should not be surprised that doing so will have harsh and far-reaching economic consequences. While production of EVs will partially offset the losses, it’s a classic error in economic reasoning to suppose the policy package as a whole could yield a net gain or offer a genuine economic opportunity. If it could, think of all the economic growth we could contrive simply by banning things. We could ban computers and make people read books instead—think of the boom in publishing. We could ban all forms of transportation and make people walk. Think of how much money they’d save, and the opportunities this would open up for shoemakers.

I better stop there before I put ideas in politicians’ heads. To be clear, people are willing to pay for computers, cars and lots of other things because they perceive that they get greater consumption value than the cost of buying the item. So far that has not proven to be true of EVs, so an EV mandate by definition must make people worse off. No one had to force the public to abandon land lines for cellphones, or vinyl records for CDs and then online streaming. When superior products appear, people will switch voluntarily. An EV mandate may be affordable by 2035—but only if the product quality and user costs have progressed to the point that people want to switch anyway, in which case the mandate is not needed.

Will an EV mandate destroy the Canadian auto industry and impose serious harm on the Canadian economy? There’s a simple way to tell: if the government perceives, based on trends in vehicle sales data, that a mandate is necessary to force consumers to switch, the answer is yes.

Author:

Ross McKitrick
Professor of Economics, University of Guelph
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Automotive

Federal government should swiftly axe foolish EV mandate

Published on July 9, 2025

By

From the Fraser Institute

By Kenneth P. Green

Two recent events exemplify the fundamental irrationality that is Canada’s electric vehicle (EV) policy.

First, the Carney government re-committed to Justin Trudeau’s EV transition mandate that by 2035 all (that’s 100 per cent) of new car sales in Canada consist of “zero emission vehicles” including battery EVs, plug-in hybrid EVs and fuel-cell powered vehicles (which are virtually non-existent in today’s market). This policy has been a foolish idea since inception. The mass of car-buyers in Canada showed little desire to buy them in 2022, when the government announced the plan, and they still don’t want them.

Second, President Trump’s “Big Beautiful” budget bill has slashed taxpayer subsidies for buying new and used EVs, ended federal support for EV charging stations, and limited the ability of states to use fuel standards to force EVs onto the sales lot. Of course, Canada should not craft policy to simply match U.S. policy, but in light of policy changes south of the border Canadian policymakers would be wise to give their own EV policies a rethink.

And in this case, a rethink—that is, scrapping Ottawa’s mandate—would only benefit most Canadians. Indeed, most Canadians disapprove of the mandate; most do not want to buy EVs; most can’t afford to buy EVs (which are more expensive than traditional internal combustion vehicles and more expensive to insure and repair); and if they do manage to swing the cost of an EV, most will likely find it difficult to find public charging stations.

Also, consider this. Globally, the mining sector likely lacks the ability to keep up with the supply of metals needed to produce EVs and satisfy government mandates like we have in Canada, potentially further driving up production costs and ultimately sticker prices.

Finally, if you’re worried about losing the climate and environmental benefits of an EV transition, you should, well, not worry that much. The benefits of vehicle electrification for climate/environmental risk reduction have been oversold. In some circumstances EVs can help reduce GHG emissions—in others, they can make them worse. It depends on the fuel used to generate electricity used to charge them. And EVs have environmental negatives of their own—their fancy tires cause a lot of fine particulate pollution, one of the more harmful types of air pollution that can affect our health. And when they burst into flames (which they do with disturbing regularity) they spew toxic metals and plastics into the air with abandon.

So, to sum up in point form. Prime Minister Carney’s government has re-upped its commitment to the Trudeau-era 2035 EV mandate even while Canadians have shown for years that most don’t want to buy them. EVs don’t provide meaningful environmental benefits. They represent the worst of public policy (picking winning or losing technologies in mass markets). They are unjust (tax-robbing people who can’t afford them to subsidize those who can). And taxpayer-funded “investments” in EVs and EV-battery technology will likely be wasted in light of the diminishing U.S. market for Canadian EV tech.

If ever there was a policy so justifiably axed on its failed merits, it’s Ottawa’s EV mandate. Hopefully, the pragmatists we’ve heard much about since Carney’s election victory will acknowledge EV reality.

Kenneth P. Green

Senior Fellow, Fraser Institute
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Automotive

Power Struggle: Electric vehicles and reality

Published on June 29, 2025

By

From Resource Works

Tension grows between ambition and market truths

Host Stewart Muir talks on Power Struggle with Brian Maas, president of the California New Car Dealers Association, and Maas introduces us to a U.S. problem that Canada and B.C. also face right now. “The problem is there are mandates that apply in California and 11 other states that require, for the 2026 model year, 35% of all vehicles manufactured for sale in our state must be zero-emission, even though the market share right now is 20%.  “So we’ve got a mandate that virtually none of the manufacturers our dealers represent are going to be able to meet.”

Maas adds: “We’re trying to communicate with policymakers that nobody’s opposed to the eventual goal of electrification. California’s obviously led that effort, but a mandate that nobody can comply with and one that California voters are opposed to deserves to be recalibrated.” Meanwhile, in Canada, the same objections apply to the federal government’s requirement, set in 2023, that 100% of new light-duty vehicles sold must be zero-emission vehicles, ZEVs (electric or plug-in hybrid) by 2035, with interim targets of 20 per cent by 2026 and 60 per cent by 2030. There are hefty penalties for dealers missing the targets.

Market researchers note that it now takes 55 days to sell an electric vehicle in Canada, up from 22 days in the first quarter of 2023. The researchers cite a lack of desirable models and high consumer prices despite government subsidies to buyers in six provinces that run as high as $7,000 in Quebec.

In the U.S. The Wall Street Journal reports that, on average, electric vehicles and plug-in hybrids sit in dealer lots longer than gasoline-powered cars and hybrids, despite government pressure to switch to electric. (The Biden administration ruled that two-thirds of new vehicles sold must be electric by 2032.) For Canada, the small-c conservative Fraser Institute reports: “The targets were wild to begin with. As Manhattan Institute senior fellow Mark P. Mills observed, bans on conventional vehicles and mandated switches to electric means, consumers will need to adopt EVs at a scale and velocity 10 times greater and faster than the introduction of any new model of car in history.”

When Ottawa scrapped federal consumer subsidies earlier this year, EV manufacturers and dealers in Canada called on the feds to scrap the sales mandates. “The federal government’s mandated ZEV sales targets are increasingly unrealistic and must end,” said Brian Kingston, CEO of the Canadian Vehicle Manufacturers’ Association. “Mandating Canadians to buy ZEVs without providing them the supports needed to switch to electric is a made-in-Canada policy failure.” And Tim Reuss, CEO of the Canadian Automobile Dealers Association, said: “The Liberal federal government has backed away from supporting the transition to electric vehicles and now we are left with a completely unrealistic plan at the federal level.  “There is hypocrisy in imposing ambitious ZEV mandates and penalties on consumers when the government is showing a clear lack of motivation and support for their own policy goals.”

In B.C., sales growth of ZEVs has recently slowed, and the provincial government is considering easing its ZEV targets. “The Energy Ministry acknowledged that it will be ‘challenging’ to reach the target that 90 per cent of new vehicles be zero emission by 2030.”  Nat Gosman, an assistant deputy minister in the B.C. energy ministry, cited reasons for the slowdown that include affordability concerns due to a pause in government rebates, supply chain disruptions caused by U.S. tariffs, and concerns about reliability of public charging sites.

Barry Penner, chair of the Energy Futures Institute and a former B.C. Liberal environment minister, said the problem is that the government has “put the cart before the horse” when it comes to incentivizing people to buy electric vehicles. “The government imposed these electric vehicle mandates before the public charging infrastructure is in place and before we’ve figured out how we’re going to make it easy for people to charge their vehicles in multi-family dwellings like apartment buildings.”

Penner went on to write an article for Resource Works that said: “Instead of accelerating into economically harmful mandates, both provincial and federal governments should recalibrate. We need to slow down, invest in required charging infrastructure, and support market-based innovation, not forced adoption through penalties. “A sustainable energy future for BC and Canada requires smart, pragmatic policy, not economic coercion. Let’s take our foot off the gas and realign our policies with reality, protect jobs, consumer affordability, and real environmental progress. Then we can have a successful transition to electric vehicles.”

Back to Power Struggle, and Brian Maas tells Stewart: “I think everybody understands that it’s great technology and I think a lot of Californians would like to have one.  . . . The number one reason consumers cited for not making the transition to a zero-emission vehicle is the lack of public charging infrastructure. We’re woefully behind what would be required to move to 100% environment. “And if you live in a multifamily dwelling, an apartment building or something like that, you can’t charge at home, so you would have to rely on a public charger. Where do you go to get that charged?

“The state’s Energy Commission has said we need a million public chargers by 2030 and two million public chargers by 2035. We only have 178,000 now and we’re adding less than 50,000 public chargers a year. We’re just not going to get there fast enough to meet the mandate that’s on the books now.”

In Canada, Resource Works finds there now are more than 33,700 public charging ports, at 12,955 locations. But Ottawa says that to support its EV mandate, Canada will need about 679,000 public ports. “This will require the installation of, on average, 40,000 public ports each year between 2025 and 2040.”

And we remind readers of Penner’s serious call on governments to lighten the push on the accelerator when it comes to ZEV mandates: “Let’s take our foot off the gas and realign our policies with reality, protect jobs, consumer affordability, and real environmental progress. Then we can have a successful transition to electric vehicles.”

  • Power Struggle YouTube video: https://ow.ly/8J4T50WhK5i
  • Audio and full transcript: https://ow.ly/Np8550WhK5j
  • Stewart Muir on LinkedIn: https://ow.ly/Smiq50UWpSB
  • Brian Maas on LinkedIn: https://ow.ly/GuTh50WhK8h
  • Power Struggle on LinkedIn: https://ow.ly/KX4r50UWpUa
  • Power Struggle on Instagram: https://ow.ly/3VIM50UWpUg
  • Power Struggle on Facebook: https://ow.ly/4znx50UWpUs
  • Power Struggle on X: https://ow.ly/tU3R50UWpVu
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