{"id":25077,"date":"2026-02-19T21:30:00","date_gmt":"2026-02-19T21:30:00","guid":{"rendered":"https:\/\/www.rbc.com\/en\/?post_type=rbc_tl&p=25077\/can-canada-be-competitive-on-carbon-pricing"},"modified":"2026-02-24T15:28:00","modified_gmt":"2026-02-24T15:28:00","slug":"subsidies-speed-bumps-the-road-ahead-for-canadas-auto-strategy","status":"publish","type":"rbc_tl","link":"https:\/\/www.rbc.com\/en\/thought-leadership\/climate-action-institute\/expert-commentary\/subsidies-speed-bumps-the-road-ahead-for-canadas-auto-strategy\/","title":{"rendered":"Subsidies & Speed Bumps: The road ahead for Canada\u2019s auto strategy"},"content":{"rendered":"\n
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Canada\u2019s new automotive strategy is a signal that Ottawa is keen to persist with a central pillar of the country\u2019s manufacturing sector, despite tariff pressures and suggestions from the U.S. President that \u201cwe don\u2019t need cars made in Canada<\/a>.\u201d The new strategy aims to carve out a new path for the industry, led by electric vehicles that have blossomed into a US$750-billion market worldwide in 2025.1<\/a><\/sup><\/p>\n<\/div>\n<\/section>\n\n\n\n

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Key 2026 themes we are watching:<\/h2>\n\n\n\n

Incentives are back, but unlikely to trigger a major uptick in sales. Provincial subsides are phasing out, and the eligible cars pool is limited<\/em><\/strong><\/p>\n\n\n\n

Offering up to $5,000 to consumers buying an EV under $50,000, the $2.3 billion subsidy will add 840,000 EVs to Canadian roads by 2030, the government projects.<\/p>\n\n\n\n

Total impact on adoption, however, might be subdued. At least 7 in 10 of all purchases under the previous federal program received a subsidy, largely stacked on top of provincial rebates. But provincial support is also dwindling. The once $7,000 stackable support in Quebec now stands at $2,000, while the $4,000 EV subsidy in British Columbia has ended. Most of the other provinces have also pulled back incentives\u2014Prince Edward Island lowered its rebate amount, New Brunswick and Nova Scotia are ending theirs, while rebates in Manitoba and Newfoundland expiring in March.<\/p>\n\n\n\n

Transaction value threshold of $50,000 targeted for the mass-market segment is also likely to limit adoption. There are only 18 models included in the list of potentially eligible vehicles for a subsidy, 2<\/a><\/sup> which made up only 30% of EV sales in both 2024 and 2025.3<\/a><\/sup><\/p>\n\n\n\n

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EV prices are still high, and Chinese cars might not deliver the expected relief <\/em><\/strong><\/p>\n\n\n\n

The average price of a new EV in Canada was about $70,000 last year,4<\/a><\/sup> so the 49,000 cars under the new China deal could prove to be an attractive bargain. However, final costs for a Chinee EV are likely to creep up as Chinese imports still carry a 6.1% tariff, plus the costs of shipping vehicles to Canada. Chinese carmakers are also likely to seek higher profit margins compared to their competitive domestic market, which is awash with more than 50 brands.<\/p>\n\n\n\n

Overall, EV price improvements have lost momentum, especially as battery prices\u2014that make up about a third of EV costs\u2014are also flattening out. The 25-40% difference in costs between Chinese and U.S. carmakers stems from efficiency in battery production.5<\/a><\/sup> The recent scale back of EV roll-out plans by the Detroit Three\u2014Ford, GM and Stellantis\u2014could further slow price improvements in North American EVs.<\/p>\n\n\n\n

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Check out <\/em>RBC\u2019s Electric Car Cost Calculator<\/em><\/strong><\/a> to compare electric vehicle costs to gas models<\/em><\/p>\n\n\n\n

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Emissions would likely to come down, mostly driven by hybrid electric vehicles adoption<\/em><\/strong><\/p>\n\n\n\n

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Canada\u2019s new emissions standards, however, don\u2019t target EV sales specifically, they only aim to achieve equivalent emission reduction of up to 75% EV sales in 2035, compared to 100% EV sales required under the previous legislation.<\/p>\n\n\n\n

Over the past decade, emissions performance improved by 30-50%, however, total emissions continued to rise as more cars entered Canadian roads, from ~20.1 million passenger vehicles in 2011 to 24.5 million in 2024.6<\/a><\/sup> 7<\/a><\/sup> BloombergNEF projects that Canada\u2019s car fleet will largely stay flat going into 2035 and decline further in future, in which case improved emissions performance will deliver absolute emissions reduction, though clean fleet eventually hinges on parting with all tailpipe emissions.8<\/a><\/sup><\/p>\n\n\n\n

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American carmakers now have the flexibility to adjust their technology to ensure compliance, which could delay full electrification in favour of hybrid cars, which are nearly half as less emitting and are more attractively priced. Hybrids are already ascendant, with car sales in the category on the rise in 2025 even as battery-electric vehicles (BEV) sales plummeted. <\/p>\n\n\n\n

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