The Canadian government is facing scrutiny over its electric vehicle (EV) mandate, which requires that 20 percent of all cars sold in Canada be electric by next year. Wade Grant, parliamentary secretary to Environment Minister Julie Dabrusin, stated in June that the government is not banning gasoline vehicles but is responding to market demands. However, critics argue that if the government were truly responding to the market, it would reconsider the mandate.

Recent data shows that EV sales in Canada have declined for five consecutive months, making up only 7.9 percent of new vehicle sales in June. Projections indicate that EV sales may reach 9.7 percent, or approximately 180,000 units, by the end of the year. Automakers that fail to meet the government's 20 percent target, with the exception of Tesla, will be required to purchase credits from Tesla to comply. Tesla, which does not manufacture vehicles in Canada, reported nearly $3 billion in regulatory credit sales for the 2024/25 fiscal year.

Brian Kingston, president of the Canadian Vehicle Manufacturer’s Association (CVMA), estimates that the cost for automakers to buy credits to meet the target could reach $3 billion by 2026. This is in addition to the hundreds of millions of dollars they are already paying due to tariffs imposed by the United States. Canadian automakers face a 25 percent tariff, but they can deduct U.S. content from this rate, resulting in an effective tariff of 10 to 12.5 percent. This translates to an estimated $400 million on $4 billion in exports.

To comply with the mandate, automakers may need to reduce the production of gasoline-powered vehicles by up to 900,000 units, which could lead to further job losses. Ontario has already seen a decline of 56,600 full-time manufacturing jobs in the second quarter of this year. Critics, including Deputy Conservative Leader Melissa Lantsman, argue that the government's approach reflects a failure of central planning, suggesting that the Liberals believe they can make better decisions for Canadians than the individuals themselves.

The EV mandate was introduced in 2022 by former Environment Minister Steven Guilbeault, aiming to reduce auto emissions. The plan calls for 20 percent of car sales to be electric or plug-in hybrid by 2026, increasing to 60 percent by 2030 and 100 percent by 2035. In 2024, EV sales accounted for 13.8 percent of total car sales, bolstered by federal incentives of up to $5,000 and provincial programs like Quebec’s Roulez vert, which offered up to $7,000. However, the federal incentive program was canceled in January, and Quebec's incentive has decreased to $4,000 this year and $2,000 next year.

As a result, the industry has expressed concerns about the feasibility of meeting the 20 percent target. Grant mentioned in the House that the Liberals had committed to reintroducing a purchase incentive of up to $5,000 during the last election campaign. However, the CVMA has pointed out that it would cost $900 million to incentivize the 182,000 sales needed to meet the target. Despite the challenges, there are no indications that the government plans to retreat from the mandate, as it did with the carbon tax.