From the Fraser Institute

By Joseph Fournier

While Trump’s trade war continues to grab all the headlines, Canada’s electric vehicle (EV) industry may be steaming toward an iceberg, due mainly to shifts in policy south of the border.

Specifically, the Trump administration has withdrew from the Paris Agreement (and its net-zero 2050 framework) and eliminated the U.S. EV mandate, which required upwards of 56 per cent of new vehicles sold in the United States. to be EV and 13 per cent be plug-in hybrids by 2032. These moves represent an existential threat to Canada’s EV investments and the viability of the large EV battery plants under various stages of planning and construction in Ontario and Quebec.

Indeed, the Trudeau government, along with the Ontario and Quebec governments, negotiated several significant battery manufacturing deals, which included subsidies and construction funding totalling $4.6 billion for the Northvolt AB plant near Montreal, $13.2 billion for the Volkswagen plant in Saint Thomas, Ontario, $15 billion for the Stellantis plant in Windsor, Ontario and $1.6 billion for the Japanese battery company Asahi Kasei plant in Port Colborne, Ontario. (Although both Northvolt AB and Stellantis are reconsidering their EV battery investments in Canada—Northvolt AB is approaching bankruptcy and Stellantis thinks that current federal subsidies are insufficient to justify its investment.)

According to the Parliamentary Budget Officer, taxpayer subsidies (a.k.a. corporate welfare) for these deals will cost Canadians up to $44 billion between 2022/23 and 2032/33. In the U.S., EV sales in 2024 were 1.2 million (7 per cent of auto total sales) buoyed by an EV tax credit of US$7,500 per new vehicle, which translates into US$9 billion in EV consumer subsidies that year alone.

All of this raises the question: can the EV industry stand on its own without massive subsidies from taxpayers?

In 2023, of the two largest EV producers (Tesla and Ford), only Tesla would break even without the EV tax credit subsidies. According to Reuters, Tesla earned approximately US$8,300 in profit per EV in 2023, and of the 1.8 million Tesla vehicles produced globally, only 400,000 were produced in the U.S. Meanwhile, even after the subsidies, Ford lost US$64,700 per EV in 2023 and US$32,700 in 2024. (It’s also worth noting that Ford, with the second-highest EV production in the U.S., produced a mere 72,000 vehicles in 2023.)

While Ford still plans to make EVs, it recently announced plans to shift production at its Oakville, Ontario factory from electric sports vehicles to gas-powered pickup trucks. The news came shortly after General Motors announced it would trim its forecast of EVs produced in 2024 by 50,000.

Clearly, U.S. legacy automakers are worried about overproducing against sluggish consumer demand, knowing that their profitability and fiscal viability resides in their internal combustion engine vehicle production lines. Numerous large European automotive manufacturers also saw a decline in EV sales in 2024 and are re-investing in their combustion engine production lines to protect profits.

Finally, beyond only EVs, Canada’s automotive manufacturing sector is in decline. Between 2014 and 2023, automotive production fell from 2.4 million to 1.5 million vehicles while automobile imports increased from $57 billion to $82 billion. Of the 1.5 million vehicles produced in Canada in 2023, 88 per cent were exported to the U.S., leaving the industry highly vulnerable to shifts in American policy (which currently include President Trump’s threat of a 100 per cent tariff on automobile exports).

The iceberg is in view. The new Carney government and our provincial governments must take stock of the decline in the automotive manufacturing sector, its near total dependence on U.S. exports, and uncertain government-driven EV investments. And they should ask if the push to electrify the automotive manufacturing base is in the long-term best interests of Canadians.

MxM News

Quick Hit:

Tesla shares surged more than 16% this week, notching a fourth consecutive week of gains and cutting into steep year-to-date losses. The rally is fueled by news of a potential new pay package for Elon Musk and the strategic addition of Jack Hartung, Chipotle’s outgoing president, to Tesla’s board. These developments come amid rising scrutiny over the board’s governance and compensation decisions, especially concerning Musk’s controversial $56 billion pay package from 2018.

Key Details:

• Tesla stock has gained over 16% this week and is now down just 13% for the year, recovering from a 40% loss earlier in 2025.
• Jack Hartung, Chipotle’s president, will join Tesla’s board on June 1, bringing seasoned business leadership.
• A special Tesla board committee is evaluating a new compensation plan for Musk after legal challenges to his previous $56 billion package.

Diving Deeper:

Tesla’s stock (TSLA) closed the week strong at $349.98, climbing 2.09% on Friday alone and marking a fourth straight week of gains. This momentum has helped the electric vehicle maker erase much of its earlier 2025 losses, which had topped 40% at one point. Now down just 13% year-to-date, the turnaround comes as investors digest two pivotal developments that could shape Tesla’s future leadership and direction.

The most immediate catalyst: Tesla’s announcement that Jack Hartung, the president of Chipotle Mexican Grill, will join its board of directors beginning June 1. Hartung will also serve on the audit committee, a significant appointment given Tesla’s board has been under fire for lack of independence and weak oversight of CEO Elon Musk. Hartung brings executive experience from not only Chipotle but also board roles at Portillo’s, the Honest Company, and ZocDoc—credentials that could help restore confidence in Tesla’s boardroom governance.

Hartung’s addition follows the bombshell report from the Financial Times earlier this week that Tesla’s board has formed a special committee to explore a new pay package for Elon Musk. The committee’s task is to find “alternative ways” to reward Musk for past work in case Tesla fails to reinstate the original 2018 compensation deal, which is now under appeal with the Delaware Supreme Court. That deal—valued at $56 billion—has drawn fire from large shareholders, prompting broader questions about Musk’s influence over Tesla and whether the board has effectively served as a rubber stamp for his ambitions.

Critics have warned that Musk’s threat to redirect his artificial intelligence efforts away from Tesla unless he is granted additional stock options represents an outsized concentration of power in the hands of one individual. While Musk continues to be the face of the company’s innovation and success, these governance concerns have given activist investors and institutional shareholders new ammunition.

Tesla board chair Robyn Denholm has also come under scrutiny, particularly after Wall Street Journal reporting suggested the board was considering replacing Musk or had urged him to spend more time at the company. Denholm has publicly denied those claims, but her own record—cashing out more than half a billion dollars in Tesla stock since joining the board in 2014—hasn’t helped stem criticism. In fact, the board recently had to settle a lawsuit over excessive director compensation, refunding millions of dollars to shareholders.

Despite these governance challenges, the market has responded positively to the board’s recent moves, seeing them as steps toward restoring stability and investor confidence. The addition of Hartung and the new pay committee could signal a willingness to address long-standing concerns about independence and oversight, even as Musk remains firmly at the center of Tesla’s orbit.

For now, investors appear to be betting that a more disciplined board—paired with a still-charismatic and high-impact CEO—could be a recipe for renewed growth and focus.

‘Elon Musk introducing the Model X” by Steve Jurvetson licensed under (CC BY-SA 2.0)