Washington's decision to end the $7,500 tax credit for purchasing a qualifying electric vehicle will have consequences felt in Canada. Several analysts believe the slowdown in government support will cause manufacturers to reconsider their North American plans, which will negatively impact the Canadian market. The Canadian market is considered too small to justify its own certification.
Is Canada too small to justify the effort?
"Certifying a vehicle to North American standards is extremely expensive. If the model doesn't sell in the United States, it's difficult to justify the investment just for Canada," says Andrew King, a senior partner at the automotive consulting firm DesRosiers Automotive Consultants. Some foreign manufacturers may therefore decide not to offer certain electric models in Canada, deeming the return on investment too uncertain without the US market.
The official end of the U.S. credit
The tax credit introduced under the Biden administration will expire on September 30, 2025. This is in accordance with the $4.7 trillion CAD ($3.4 trillion USD) budget that was adopted as part of the One Big Beautiful Bill Act and signed into law by President Trump on July 4. This leaves U.S. dealers with less than three months to sell their inventory. Already, giants such as Ford, GM, Honda, Nissan and Stellantis have announced delays or cancellations of their North American electric vehicle projects.
Will there be fewer electric vehicles and more hybrids?
According to Sam Fiorani, VP of AutoForecast Solutions, the elimination of the tax credit is prompting automakers to increase the flexibility of their factories so they can produce electric, hybrid and combustion engine models. He predicts that the U.S. market share for electric vehicles will fall between the 10 percent already anticipated and 20 percent. Over the next five years, Canada will fare slightly better, but not well enough to reverse the trend.
Canadian incentives have also dried up
Canada's federal incentive program for zero-emission vehicles (iVZE) has been suspended since January 12, 2025, due to lack of funds. Ottawa has promised to reinstate the program but has not announced a date. Without federal support and with an already shrinking market, electric vehicle sales in Canada are declining. According to Statistics Canada, 40,000 vehicles were registered in the first quarter of 2025, compared to an average of 70,000 per quarter in 2024.
A European solution is not so simple
Several groups, including the Canadian Automobile Dealers Association and Electric Mobility Canada, have suggested that Ottawa decouple its safety standards from those of the U.S.to allow for importing more affordable European models. However, Transport Canada remains cautious. Significant differences in road infrastructure, speed limits, and vehicle size would make such a transition complex and slow to implement.
A future to be redefined
The end of U.S. rebates, combined with uncertainty in Canada, is slowing down the North American electric vehicle market. If Ottawa doesn't react quickly, Canadian consumers could find themselves with fewer choices and higher prices.