How tariffs and slumping EV sales are crippling the 'backbone' of Canada's economy
A third of auto production in this country has disappeared since the pandemic, and challenges and competition mount daily. Can the industry survive?
Assembly plants in Ontario used to produce hundreds of thousands of vehicles per year in total, were home to thousands of employees, and helped keep tens of thousands of jobs outside the plants.
The federal government granted Ford Motor Co. $464.5 million earlier this month so it can reopen its Oakville, Ont., assembly plant and start producing Super Duty pickup trucks this year, a shot in the arm for a sector in the midst of one of its most severe downturns ever.
But giving Ford nearly half a billion dollars so it can build internal combustion engine (ICE) vehicles in Canada and at a smaller scale — with the plant's output poised to shrink to no more than 100,000 vehicles per year from 247,000 in 2019 — also marked a major shift by the government.
Up until last year, it had focused on building a domestic electric vehicle supply chain. But a collapse in EV demand and ongoing trade disruptions with the United States have pushed it into triage mode, attempting to manage multiple headwinds that have left the sector on rocky ground and sown tensions between stakeholders.
Industry Minister Mélanie Joly told a crowd of business executives and academics on May 7 at the Public Policy Forum's Canada Growth Summit in downtown Toronto: “I really, really think we’ve been able to square the circle with our auto strategy, which is indeed not an easy one.”
She said the problem her government sees, beyond eliminating U.S. tariffs, is that EV adoption is increasing everywhere in the world, but not in Canada and the U.S.
EV sales dropped 34.7 per cent in Canada last year to 9.5 per cent of new registrations from 14.6 per cent in 2024. Worldwide, EV sales accounted for 25 per cent of all new vehicles in 2025.
Along with that decline, many, though not all, of the estimated $46 billion of investments in a Canadian EV supply chain announced between 2020 and 2024, have been delayed or scrapped altogether.
For example, Honda Motor Co. Ltd. “indefinitely suspended” its proposed $15 billion EV assembly plant and battery manufacturing complex in Alliston, Ont., two weeks ago.
Yet the federal government in February announced it was committing billions of dollars to build out EV charging infrastructure and shave money off the cost of an EV.
Joly also said the decline in EV sales is why the government struck a deal in January that allows China to send up to 49,000 EVs into Canada this year at a 6.1 per cent duty rate.
But none of those policies provide immediate relief to automakers here since hardly any homegrown EVs are produced.
Automakers have repeatedly said through their representatives that their most urgent concern is securing access to the U.S. market, where historically, an estimated 80 per cent to 90 per cent of all vehicles built in Canada are eventually sold.
“If we do not have U.S. access, we do not have an auto industry,” Brian Kingston, president of the Canadian Vehicle Manufacturers’ Association, said. “That’s just the bottom line.”
He estimates that automakers in Canada in 2025 paid $5 billion in U.S. tariffs, which still stand at 25 per cent on vehicles not compliant with the Canada-U.S.-Mexico Agreement (CUSMA), minus the value of any U.S. parts contained within.
