Days after Canada dismayed climate and energy transition advocates with a 100% tariff on cost-competitive Chinese electric vehicles, a government report warned that EVs must become substantially more affordable than gas-powered cars if the country is to meet its zero-emission sales targets.
The relative ownership cost of battery-electric vehicles would need to decrease by 31% to meet Canada’s zero-emission vehicle sales target of 60% in 2030, the Parliamentary Budget Office (PBO) concluded in a new analysis
The PBO report published August 29 comes eight months after the federal Liberals mandated that battery-operated passenger cars must make up one-fifth of all new vehicle sales by 2026, growing each year until it hits three-fifths by 2030, and all vehicles by 2035, reports The Canadian Press.
It compares the purchase price of a new vehicle, federal and provincial rebates for EVs, and operating and maintenance costs over eight years. For passenger cars, the eight-year cost for an EV model in 2022 was 88% of the eight-year cost of a similar gas-powered model. For SUVs and trucks, the EV models are about 92% of the cost of buying, operating and maintaining a gas-powered option.
As of now, the annual cost of operating and maintaining an EV is around 2.5 times less than a gas-powered equivalent, writes CP, but they are also around 6% more expensive to purchase, which can put off new buyers.
“After all, higher upfront costs are a barrier for many cash-strapped families, even if they recognize an EV would save them money over time,” said Joanna Kyriazis, director of public affairs at Clean Energy Canada.
Price makes a difference, she added. In 2023, one in four new vehicles sold in Europe were EVs, with 11 models priced under C$45,000. Canada had only two such models, and its EV sales were 10.8%, the first time they exceeded 10% nationally.
Tariffs Clash with EV Affordability
The PBO report came three days after Prime Minister Justin Trudeau said that due to unfair business practices in China, and in an effort to “level the playing field for Canadian workers,” Ottawa would impose a 100% tariff on imported Chinese EVs starting October 1.
Chinese EVs cost $13,000 in their domestic market, compared to the average C$73,000 price in Canada. In the subject line of its Monday morning newsletter, Clean Energy Canada said the tariff would put affordable EVs “on verge of extinction”.
But that wasn’t Ottawa’s only option.
“The federal government could have taken a balanced approach to a complicated issue: one that considered not only the priorities of traditional automakers and Canada’s domestic industry but also the needs of affordability-constrained Canadian consumers and our climate,” Kyriazis and Clean Energy Canada’s policy and strategy VP, Rachel Doran, write in a Toronto Star opinion piece.
Instead of the middle path, like the 9% to 36% tariffs pursued by Europe, Canada took its “cue from the U.S. (and perhaps a push from the consistently pro-tariff Conservative Party of Canada) with a shut-and-lock-the-door 100% tariff” that weakens competition that could drive EV prices down across the sector.
The Star’s contributing columnist Taylor Noakes says that policy is “bad for consumers and worse for the environment.”
It is the climate emergency—not China and certainly not Chinese imports—that poses “a clear and present danger,” he adds. “The severity of the climate emergency is such that the federal government’s top priority ought to be getting as many fossil-fuel burning vehicles off the roads as quickly as possible.”
That would mean making EVs significantly cheaper to own, suggests the PBO report.
Environment Minister Steven Guilbeault said in a statement that the PBO report is “thoughtful” and noted it confirms EV prices are continuing to decline relative to gas models.
The government regulations that set the sales mandate are contributing to that, with one study suggesting gas-powered vehicles will cost 6.1% more by 2035, while EVs are expected to cost 22% less as a result of the mandate.
Automakers Weigh In
But some auto manufacturing advocates, like Canadian Vehicle Manufacturers’ Association President Brian Kingston, say there need to be strong purchase incentives for EVs to meet the federal targets, reports CTV News.
Without incentives, and without subsidies for manufacturers, EV sales targets will have to be reviewed, Kingston said.
The PBO report also says continued subsidies or price adjustments by auto manufacturers could lead to price reductions for EVs.
The tension over Canadian EV prices is playing out against a backdrop of larger shifts across the EV sector, in part indicated by plunging prices for used EVs. Cooling—but sustained—growth in the sector has prompted EV battery companies to scale back or call off plans for new developments.
In Quebec, Swedish EV battery manufacturer Northvolt now says plans for a $7-billion EV battery plant on Montreal’s South Shore could take up to a year and a half longer than originally planned as the company carries out a strategic review. Experts say the delay could undermine the competitiveness of Canadian-based companies in the industry.
“There are issues in the investments from the North American car manufacturers who are kind of pushing back a bit on their development of electric cars,” Normand Mousseau, scientific director of the Trottier Energy Institute at Polytechnique Montréal, told CBC News.
“If the investments are going forward elsewhere in North America, it means that we are losing competitiveness with respect to other places where battery factories are being built,” he said.
A more environmentally friendly way to travel is through High Occupancy Vehicles (HOV) because they use much less of the Earth’s mineral resources, etc. On that topic, see this link for the Toronto Transit Riders take on the recently announced The Canada Public Transit Fund – Reactions and Analysis https://www.ttcriders.ca/cptfreaction
This article is spot on. Facilitating the supply of Chinese EVs, particularly the smaller less expensive ones, to Canadians is an obvious way toward achieving the climate goals within the timeline of the federal government. Not only that, the new 100% tariff smacks of sour grapes.
After spending decades carefully connecting with China to engage them in international trade to make them more like the free enterprise West, Canada is recoiling from the commercial success of the Chinese EV industry. Rewarding successful initiative in the business world is mainstream news, but getting outflanked by the folks you are trying to convert to your way of doing business is clearly unacceptable! The successful new businesses in China are supposed to remain subservient to the West even if their success provides a significant boost to remedying the urgent need to address climate change. The Canadian government policy based on urgent necessity (climate change) is being sidelined to accommodate a second, concerned with “unfair” trade practices and short term business considerations. Our long-term survival on the planet depends on the former.
Global policies that knuckle under to short term corporate pressure will be our undoing.
Western EV companies started with the large and expensive EV models because they’re more profitable. They’re only now, later this year and in 2025, rolling smaller and cheaper EV models off the assembly line. This is where a lot of the price differential comes from–the author is comparing China’s cheapest EV model to our most expensive EV model and, guess what? China’s cheaper EVs are cheaper than our expensive ones. And we can’t throw our EV and battery industry under the bus. The auto industry added $14B to Canada’s GDP in 2023, 125,000 direct jobs and 375,000 indirect jobs and provided $38B in export revenue is important to Canada.