The future of electric vehicle (EV) production in Canada is in jeopardy as federal and provincial governments grapple with significant financial commitments. Since 2020, the Canadian government, along with Ontario and Quebec, has allocated up to $52.5 billion to establish a domestic EV and battery supply chain. This funding includes $31.4 billion from the federal government and $21.1 billion from provincial sources.

However, the parliamentary budget office reports that this amount exceeds the $46.1 billion the EV industry plans to invest in 13 major projects from 2020 to 2024 by 14%. Most of the public subsidies have yet to be disbursed, leaving taxpayers and auto sector jobs at risk as the struggling EV market faces declining sales.

Several factors have contributed to the drop in EV sales, including the reduction or elimination of consumer subsidies by the federal and provincial governments. The suspended federal subsidy, which could provide up to $5,000 per vehicle, is expected to be revived, but details remain unclear.

Economic uncertainties, such as ongoing tariffs on auto parts and steel, as well as U.S. opposition to EV subsidies, have also dampened consumer interest. Concerns about higher prices, limited range, and insufficient charging infrastructure compared to traditional gasoline vehicles further complicate the situation.

In October 2024, Canada implemented a 100% tariff on EVs imported from China to protect its emerging industry from competition with lower-priced, technologically advanced Chinese models. In retaliation, China imposed tariffs on Canadian canola oil and oil cakes, significantly impacting Canada's canola sector, which typically exports nearly $5 billion annually.

The situation worsened when Prime Minister Mark Carney postponed a mandate requiring that 20% of new car sales be EVs starting next year. This decision came after pressure from the auto sector, which argued that compliance would lead to higher prices and reduced consumer choice. Carney announced a 60-day review of the policies on September 5, amid plans for stricter mandates of 60% by 2030 and 100% by 2035.

Public opinion surveys indicate that about 60% of Canadians support dropping tariffs on Chinese EVs if China reciprocates by lifting its tariffs on Canadian canola. Proponents argue that allowing Chinese EV imports could lower prices, enhance competition, and reduce reliance on the U.S. auto sector. However, critics warn that this could provoke U.S. backlash, undermine government investments in the Canadian EV industry, and raise security concerns.

Ontario Premier Doug Ford has urged Carney to maintain the 100% tariff on Chinese-made EVs, citing the potential loss of 157,000 direct jobs in Ontario's auto sector and hundreds of thousands of indirect jobs across the country. Despite significant taxpayer investments in the EV sector, the Ford government has not supported provincial subsidies for EV buyers, which could help boost sales.

The Canadian auto and auto parts sectors, along with trade unions, oppose the elimination of tariffs on Chinese EVs and support Carney's decision to delay EV mandates while incentivizing Canadian consumers to purchase EVs. This situation starkly contrasts with former Prime Minister Justin Trudeau's optimistic statements in April 2024, when he claimed, "We bet big on electric vehicles. Now that industry is betting on us." Today, that bet appears increasingly precarious.