Carney's EV Policy Shift Criticized as Illusory Threat to Auto Sector
Prime Minister Mark Carney has announced the repeal of Canada's electric vehicle mandate, positioning the move as decisive support for the automotive industry. However, critics argue this represents merely a semantic change rather than substantive policy relief. The replacement with stringent new greenhouse gas emissions standards for gasoline-powered vehicles maintains similar market pressures that could prove equally damaging to manufacturers and dealers nationwide.
The Policy Rephrasing That Changes Little
Carney's administration has withdrawn the Electric Vehicle Availability Standard, which would have required 20 percent of new car sales to be electric vehicles in 2026, escalating to 100 percent by 2035. In its place, the government introduces demanding emissions standards designed to achieve 75 percent EV sales by 2035 and 90 percent by 2040. This represents essentially the same mandate with a marginally extended implementation timeline, according to industry analysts.
This pattern mirrors Carney's earlier approach to energy policy, particularly the Memorandum of Understanding with Alberta that suggested pipeline approval without concrete action. The automotive policy repeal appears similarly constructed—changing terminology while preserving fundamental regulatory impact.
Economic Consequences for Canadian Auto Industry
Research published in the peer-reviewed Canadian Journal of Economics demonstrates how phased EV mandates create distorted market conditions. Automakers experience temporary above-market profits on gasoline vehicles while sustaining losses on electric models until production costs decrease sufficiently. These "rents" occur because mandates restrict gasoline vehicle sales below consumer demand levels, enabling price increases similar to illegal price-fixing schemes—except government regulation sanctions this practice.
The critical problem remains that profits from gasoline vehicles cannot offset losses from electric models or compensate for overall market contraction as prices rise. Whether the Canadian auto sector survives long-term depends heavily on how rapidly EV technology advances and production costs decline.
Dealer Perspectives Reveal Practical Challenges
Consider the situation from an automotive dealer's viewpoint. A typical annual sales mix might include 50 large vehicles (pickups and SUVs), 40 sedans, and 10 electric vehicles, with most profits generated from larger models. New emissions standards require dramatically lower average per-kilometer CO2 emissions across the fleet.
To comply, dealers must shift most pickup and SUV buyers toward sedans or electric alternatives, potentially achieving year-end sales of just 5 percent SUVs, 20 percent sedans, and 75 percent electric vehicles. Advertising cannot accomplish this transformation alone; instead, dealers must increase prices on SUVs and sedans until sufficient buyers alter their preferences.
At elevated price points, many consumers simply abandon purchases entirely. Dealers may achieve the mandated sales mix but face reduced overall volume, with most sales occurring on low-margin or loss-generating vehicles.
Survival Prospects Under Current Policy Framework
Even under optimistic technological advancement scenarios, research suggests the Canadian auto sector would struggle to survive the original mandate schedule. While calculations haven't been updated for the revised policy, its close resemblance to the initial framework maintains similar economic pressures. The industry faces significant challenges adapting to regulations that fundamentally alter consumer choice and market dynamics through indirect rather than direct mandates.
The policy approach raises broader questions about regulatory transparency and economic impact assessment in environmental policymaking. As Canada navigates the transition toward lower-emission transportation, balancing environmental objectives with industrial viability remains a complex challenge requiring more than superficial policy adjustments.
