Auto industry calls for increase to EV incentives to $15,000 instead of mandates, but would that work?


If Ottawa is serious about requiring all new cars sold in Canada be electric by 2035, it should increase incentives to $15,000, say auto industry associations.

“They’re going to be regulating that Canadians buy pricey vehicles,” said Brian Kingston, chief executive of the Canadian Vehicle Manufacturers’ Association (CVMA), which represents Ford Canada, General Motors Canada and Stellantis (formerly Fiat Chrysler). “If they’re not willing to help buyers in what is an inflationary environment … then they’re not going to come anywhere close to achieving their sales targets.”

In a plan to reduce Canada’s greenhouse gas emissions by 40 to 45 per cent below 2005 levels by 2030, released last week, Ottawa said it will “develop” a zero-emissions vehicle (ZEV) mandate, which would require car makers to offer a percentage of new passenger vehicles that can drive without emitting CO2. That percentage would increase annually – 20 per cent by 2026, 60 per cent by 2030 and 100 per cent by 2035.

While Ottawa has set sales targets for electric vehicles before – first for 100 per cent by 2040, then, last year, for 100 per cent by 2035 – this is the first time it has officially said it will pass rules requiring companies to offer a specific portion of ZEVs.

Environment and Climate Change Canada (ECCC) said in an e-mail statement the rules have not been finalized and will be released for consultation by early 2023.

Three auto industry associations – CVMA, Global auto makers of Canada (GAC), which includes Japanese, Korean and German auto makers selling in Canada, and the Canadian Automobile Dealers Association (CADA) – oppose a ZEV sales mandate. They say auto makers have already invested $US515-billion worldwide into transitioning to EVs and don’t need governments to tell them how to do it.

To meet sales targets, they say Ottawa will have to raise federal incentives to $15,000 from the current maximum of $5,000.

“Yes, it’s a lot of money, but it won’t be required forever,” said Tim Reuss, CADA chief executive officer. “But it’s required to kick-start [sales] in all the provinces.”

While the federal incentive applies everywhere in the country, seven provinces – British Columbia, Yukon, Quebec, New Brunswick, Nova Scotia, PEI and Newfoundland and Labrador – offer their own incentives on top of it. They range from up to $3,000 in B.C. and Nova Scotia to up to $8,000 in Quebec, which will be lowering its incentive to $7,000 on July 1. They’re $5,000 in the other four provinces.

In 2021, the bulk of EV sales in Canada were in B.C. and Quebec.

Make more vehicles eligible for incentives?

Right now, the federal incentive only applies to cars with a base model that costs less than $45,000. The industry groups want that cap increased to $70,000 for sedans and $100,000 for trucks and SUVs.

“Right now, 23 out of [around] 70 [ZEV] models available qualify for the rebate,” said David Adams, GAC chief executive. Most of those are smaller passenger cars, “but our marketplace is more than 80 per cent SUVs and trucks.”

They are also calling for Ottawa to exempt electric vehicles from a proposed federal luxury tax on cars costing more than $100,000, expected to be announced in Thursday’s 2022 federal budget.

The Environment ministry’s plan promised to spend $1.7-billion to extend ZEV incentives for three more years and said the budget will provide more details of what the program will look like.

It also pledged $400-million in additional funding for charging stations to help build 50,000 new chargers.

Right now, there are about 15,000 public or semi-private chargers available with money in last year’s budget to build 17,000 new chargers in the next three years.

That won’t be enough, said CVMA’s Kingston.

“If we’ll have 40 million [ZEV] vehicles by 2050, that will require one charger for every 10 vehicles – that’s four million chargers,” he said. “We’re not suggesting the government build all four million, but if they’re going to regulate the vehicles Canadians buy, they need to put policies to support them.”

Not realistic?

While Ottawa needs to do more to encourage people to buy EVs, the call to triple the federal EV incentive is improbable, said Joanna Kyriazis, program manager, clean transportation with Clean Energy Canada.

“All their asks are in the right direction, but the magnitude they’re looking for is unrealistic compared to what other countries have offered,” Kyriazis said. “To add to this picture, federal and provincial governments are providing a lot of support [to manufacturers.]”

This week, for instance, the federal and Ontario governments announced they’d be contributing $259-million each for GM facilities in Oshawa and Ingersoll, Ont. The money is part of GM’s $2-billion investment to build an Oshawa EV production line.

Kyriazis said the federal government could consider raising the federal incentive beyond $5,000, “but it’s tough to say what the right number is because inflation would factor in.”

Instead of asking Ottawa to raise incentives to $15,000, auto makers should ask provinces to step up, Kyriazis said.

California is the gold standard on how to encourage people to switch to EVs, Kyriazis said.

It offers up to US$7,000 (C$8,730) in rebates, but there are limits on rebates to buy or lease an EV depending on the purchase price – Teslas are no longer eligible because of recent price increases, for instance – and on income.

Tom Green, senior policy adviser with the David Suzuki Foundation, doesn’t think it makes sense to hike incentives.

“Right now, it’s hard to get an EV, so demand is not the problem,” Green said. “So why would we increase demand by increasing the subsidy? It doesn’t make sense and would be hugely expensive. We’d be using public funds to subsidize typically better-off members of society.”

Will mandate include PHEVs?

The industry associations said Ottawa’s mandate should include PHEVs, even though they’re not fully electric.

“[PHEVs] will have to be part of this,” said CADA’s Reuss, “It’s already bad enough that the government is deciding what the winning technology is.”

But Green said Ottawa should allow car makers to include PHEVs as a ZEV vehicle – as long as they have an electric range of at least 70 kilometres – and only until 2030. By then, there should be enough chargers and EV options that most buyers won’t need a gasoline backup.

“We prefer [fully electric] vehicles, but PHEVs can be transition vehicles for people in remote areas.” Green said. “They allow for most of your daily driving to be electric-only, as long as the range is sufficient.”

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