Will Electric Vehicle Incentives Reach $15,000?

By John Hayden

With an ambitious goal of selling only electric new cars by 2035, the Canadian Government is looking at electric vehicle incentives, as it faces pushbacks from cash-strapped buyers. “They’re not going to come anywhere close to achieving their sales targets, … If they’re not willing to help buyers in an inflationary environment,” says Brian Kingston, CEO of the Canadian Vehicle Manufacturers’ Association (CVMA).

Representing General Motors, Stellantis (formerly Fiat Chrysler), and Ford Canada, he sees a bumpy road ahead if Canadians are forced into buying pricier vehicles. Although nationwide EV sales targets have been set before (initially 100% by 2040, subsequently brought forward to 2035), this is the first time that Ottawa is indicating it will adopt regulations forcing auto-assemblers to offer a specific percentage of zero-emission vehicles.

According to Environment and Climate Change Canada (ECCC), these rules will be released for public consultation by early 2023. The intention is to slash Canada’s greenhouse gas emissions by 2030 aiming at 40% to 45% below 2005 levels.

Government Support for Manufacturers

Instead of pumping up buyer incentives, federal and provincial governments are focusing on the manufacturing side. Furthermore,  in April 2022, the Ontario and federal governments announced investments of $250 million each in the GM complexes at Ingersoll and Oshawa. These investments are part of the GM plan to build a $2 billion EV production line in Ontario.

Noting that this sector has already invested well over $500 billion worldwide in the transition to electric vehicles, the sales-side feeling is that governments need to step up to the pitch as well.

Industry-Wide Agreement on Electric Vehicle Incentives 

Unsurprisingly, the CVMA opinion is shared by the Canadian Automobile Dealers Association (CADA) and Global Auto-Makers of Canada (GAC), which clusters together German, Korean and Japanese auto-makers operating in Canada. Speaking for CADA, its CEO Tim Reuss believes that current federal incentives of up to $5,000 must be tripled (at least over the short term), in order to kickstart this go-electric trend.

Ripple Effects on Car Loans 

From the vehicle financing standpoint, a $15,000 rebate would underpin a solid down payment on lower-priced EV models. At the same time, minimal charging costs would free up family budget funding, leading to higher monthly repayments and shorter auto loan terms.

Overall, this would speed up the market penetration of EV vehicles, particularly among lower-income buyers who are unable or unwilling to pay higher prices for zero-emission transportation.

Seven Provinces Offer EV Incentives

While the federal program operates nationwide, seven provinces (so far) have introduced their own incentive programs:

  • $3,000 in Nova Scotia and British Columbia;
  • $5,000 in New Brunswick, Yukon, Prince Edward Island, and Newfoundland and Labrador;
  • $8,000 in Québec, dropping to $7000 on July 1, 2022.

Millions More Charging Stations Needed

As all these EV options begin to populate Canadian roads, a charger shortage is looming. With some 15,000 semi-private and public chargers currently installed, and budget funding for a further 17,000 over the next three years, this falls well below expected demands.

With forty million vehicles forecast on Canadian roads by 2050 and one charger required for every ten vehicles,  the math is simple.  Four million chargers will be needed. This makes the 2022 budget allocation look pretty inadequate, as  $400 million will fund only 50,000 new chargers.

Is Expanding Electric Vehicle Incentives Eligibility the Answer?

Another option urged by these industry groups is to raise the ZEV cap. Currently applicable only to vehicles with base models priced at under $45,000, manufacturers are urging an increase to $70,000  (sedans), and $100,000  (SUVs and trucks).

GAC head David Adams notes that only 23 of around seventy ZEV models currently qualify for federal rebates. Most of them are small passenger runabouts. However, this excludes around 80% of the Canadian market, consisting largely of trucks and SUVs.

There’s a Perfect EV for Everyone 

Other suggestions include enlarging the definition of a zero-emission vehicle. Actually, there’s an entire litany of options, only some of which are covered by the current EV criteria:

  • BEV – battery-electric vehicle;
  • HEV – hybrid electric vehicle;
  • PHEV – plug-in hybrid electric vehicle;
  • EREV – extended-range electric vehicle.

With all these choices currently on the market, there are certainly more in the pipeline. Indeed,  the zero-emissions vehicles market is becoming more diverse, as prices drop. There seems little doubt that most Canadians will be considering a ZEV by the end of this decade.

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