The federal government has announced the return of the $5,000 federal EV incentive starting February 16. That comes as part of Ottawa’s new national automotive strategy announced today in Ottawa. At the same time, Prime Minister Mark Carney is ending electric vehicle sales quotas. Here’s an overview of the plan:
A rebate of up to $5,000
The government is unlocking a budget totaling $2.3 billion to encourage adoption of EVs and reduce vehicle emissions. That fund will provide a rebate of up to $5,000 for the purchase of an electric vehicle priced at $50,000 or less. Notably, this price cap does not apply if the electric vehicle is fully assembled in Canada. The measure takes effect on February 16th.
We should point as well that the $50,000 eligibility cap is now based not on a vehicle’s base model MSRP as before, but on the final transaction price. That means that an EV priced at $49,000 with an expensive options package added on is no longer eligible for the federal rebate.
A gradual reduction of the incentive
It should be noted the government has built in a staggered reduction in the rebate amount. It will drop to $4,000 as soon as next year in fact, then be reduced to $3,000 in 2028, and finally to $2,000 in 2030.
Chinese EVs not eligible
It should also be noted that those Chinese-made electric vehicles set to start arriving in-country at some point will not be eligible for this incentive. Only models manufactured in a country with which the government has signed a free trade agreement will qualify for the federal rebate.
As a reminder, last January, Canada lowered the surtax from 100 percent to 6.1 percent on the importation of a limited number of Chinese-made electric vehicles meeting certain criteria.
Up to $2,500 for the purchase of a plug-in hybrid
The government is also granting incentives to consumers wishing to purchase a plug-in hybrid vehicle (PHEV). The amount will be $2,500 this year. It will be reduced to $2,000 in 2027, climb back up to $2,500 in 2028 and 2029, and then back down to $2,000 in 2030.
The federal government says the funds available for the program will not be unlimited. In other words, the program remains in effect only until the allocated funds are exhausted.
Revision of quotas
The Carney government is revising the quotas which previously required 60 percent of new vehicles sold in the country to be electric by 2030, and 100 percent by 2035. Now, for 2035, the government is aiming for a 75-percent adoption rate, reaching 90 percent by 2040. However, these are targets rather than binding standards. Instead, Ottawa is applying GHG (greenhouse gas) emission standards, allowing manufacturers to use various technologies to reduce emissions.
The charging network
The government announced a fund allocation of $1.5 billion to the Canada Infrastructure Bank to expand the electric vehicle charging network across the country.
Additional investments
The Carney government will invest $3 billion from the Strategic Response Fund to encourage automotive manufacturing, specifically assembly and parts production. Tax measures were also announced to attract investment, particularly by expanding the ability to deduct investment-related expenses.
End of the uncertainty
In January 2025, it was revealed that the federal government was ending the iZEV (Incentives for Zero-Emission Vehicles) program. In June of that same year, Julie Dabrusin, Minister of Environment and Climate Change, announced that government aid for EV purchases would return. Months passed with no action.
When the federal budget was tabled last November, there was no mention of the return of any subsidy. Now, the program is back — this time with slightly modified rules.