Car companies have been lobbying the federal government to repeal the sales mandate, which requires one in five new vehicles sold in Canada by 2026 to be zero emission.Galit Rodan/The Globe and Mail
The federal government is assessing the appropriate level for its zero-emission vehicle sales requirement as it discusses various ways to support Canada’s hard-hit auto sector, Industry Minister Mélanie Joly says.
In an interview with The Globe and Mail, Ms. Joly said the government is in active discussions with automakers about the ZEV mandate, which requires one in five new vehicles sold in Canada by 2026 to be zero emission. This rises to 60 per cent by 2030 and 100 per cent by 2035.
Car companies, including Ford F-N, General Motors GM-N and Stellantis STLA-N, have been lobbying Ottawa to repeal the mandate entirely. They say falling electric-vehicle sales in Canada make it impossible to hit the 2026 target, and that the regulation will pile pain on an industry already fighting to survive U.S. President Donald Trump’s auto tariffs.
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“I am a very pragmatic person,” Ms. Joly told The Globe. “It’s not the goal of the government to be disconnected from reality when it comes to what is going on across the country, which is, at this point, there has been a drop in sales of electric vehicles and 25-per-cent tariffs.”
“That’s why we’re working with them to find what would be that right level,” she said, noting that the government is also planning to reintroduce its subsidy for EV purchases, which ended in January.
Ms. Joly, who is Ottawa’s point person on the auto industry, declined to provide details about any potential changes to the EV mandate being discussed.
“We are in active conversation to see how can we support them, while continuing to continue in our vision of helping the transition to electric vehicles,” she said.
The federal government has already announced several measures to support Canada’s export-oriented auto industry, which has seen its competitive position eroded by Mr. Trump’s 25-per-cent tariffs on foreign vehicles. (Canadian and Mexican automakers have a partial exemption, and don’t pay tariffs on the value of U.S. auto parts in their vehicles exports.)
In March, Prime Minister Mark Carney pledged $2-billion for a “strategic response fund” aimed at boosting the sector’s competitiveness and supporting auto jobs, and he promised government vehicle procurement would focus on Canadian-made cars. He also introduced a remission system that allows the big U.S. auto companies to export a certain quantity of U.S.-made vehicles to Canada tariff-free if they maintain production levels in Canada.
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Automakers and auto workers unions say measures to address trade disruptions need to happen alongside policy changes that account for the fall in EV sales.
Sales of zero-emission vehicles – which include battery, fuel cell, or plug-in hybrid vehicles – fell by 32 per cent in May from a year ago to comprise 7.9 per cent of all new car sales, Statistics Canada says. To meet the required ratio in 2026 at current sales levels, carmakers could be forced to withhold one million internal combustion engine vehicles from Canadian dealer lots, according to industry analysis.
“The only way they can avoid the penalty is to cut down on the production of internal combustion engines, which is like shooting yourself in the foot,” said Jeff Gray, president of the Unifor local that represents workers at General Motors’s Oshawa truck plant.
Carmakers that do not meet the thresholds must purchase credits on the open market and/or limit the number of internal combustion cars for sale. The industry says the plunge in Tesla Inc. TSLA-Q sales has made credits scarce and expensive, and the sales targets are not attainable.
David Adams, chief executive officer of Global Automakers of Canada, which represents Canada’s largest automakers, Toyota Motor Corp. and Honda Motor Co. Ltd., and several overseas brands, said any mandate needs to be attainable and updated regularly.
“It needs to be reviewed on a regular basis to make sure that what consumers are purchasing is actually taking us on the right path to meet those targets,” Mr. Adams said, “because it’s easy to throw out numbers; it’s a lot more difficult to convince consumers … to make those purchases.”
The conversations around the ZEV mandate have picked up in recent weeks. The chief executives of Ford Motor Company of Canada, General Motors of Canada Co. and Stellantis Canada met with Mr. Carney in Ottawa in early July.
There have been subsequent meetings between auto industry representatives and government officials. Mr. Adams said there are four ministries involved in the talks held last week and in June – Industry, Environment, Finance and Infrastructure.
Brian Kingston, president of the Canadian Vehicle Manufacturers’ Association, which represents Ford, General Motors and Stellantis, said he left a meeting last week with Environment Minister Julie Dabrusin feeling discouraged.
“There is a line of communication, however, she has been clear that the government will not repeal the mandate, which is a problem because it is extremely damaging,” Mr. Kingston said. Ms. Dabrusin’s office did not immediately respond to e-mailed questions.
The auto industry is only part of Ms. Joly’s portfolio. She’s also helping lead the government’s efforts to support other industries that have been hit by tariffs, notably the steel and aluminum sectors, which face U.S. levies of 50 per cent.
Ottawa rolled out a broad support package for the steel sector in two phases over the past month. This includes tariffs on steel coming into Canada above a certain quota, $1-billion through Canada’s Strategic Innovation Fund to help companies rejig their production and supply chains and new rules to promote the use of Canadian-made steel in government procurement.
“When you look at the steel sector, the 50-per-cent tariff is an incredible barrier to not only export, but to the business model that was developed at the time, which was basically to support U.S. auto manufacturing. And right now that’s not possible,” Ms. Joly said.
She said the goal of the steel measures is to help producers pivot to supplying domestic markets, including the construction and defence industries. “We need to make sure that they’re developing the type of steel for the industries that we need them to service now in the country,” she said.
The government has not yet announced supports for the aluminum industry, but Ms. Joly said the government is talking with companies about various measures, with a focus on “the smaller players right now that are much more affected.”
The aluminum industry is in a better position than the steel industry because the U.S. is much more reliant on Canadian exports of aluminum, and Canadian producers have benefited from a spike in prices in the U.S.