While Transport Canada’s Earth Day announcement means some higher-priced electric vehicle models, particularly SUVs and pickups, are now eligible for the federal iZEV program, used EVs are still excluded and the rebate is unchanged at $5,000

More new electric vehicles sold in Canada will be eligible for the federal government’s $5,000 purchase rebate for EVs as Transport Canada has announced new price ceilings for light- and medium-duty vehicles.

Under the new rules, which took effect April 25, the rebate is available on EV passenger car models with a base price under $55,000, higher-priced versions of those models up to $65,000, larger vehicles including SUVs, minivans and pickup trucks with a starting price of $60,000, and more expensive versions of those models up to $70,000.

Previously, many models of electric SUVs, vans and pick up trucks missed the former $45,000 ceiling — despite those classes of vehicles making up 80 per cent of all vehicles sold in Canada.

Another program tweak that’s received less attention sees the definition of longer-range plug-in hybrid vehicles (PHEVs) changed so that it is now based on electric range in kilometres. PHEVs with an electric range of 50 km or more will be eligible for $5,000, and those under this threshold will continue to be eligible for $2,500.

According to Transport Canada, this means certain current plug-in hybrid SUVs from Ford, Hyundai and Kia are now eligible for the full rebate.

“Through the expanded investments announced today, Canadians will have access to cleaner, more affordable transportation in their communities,” said Jonathan Wilkinson,
minister of natural resources, in a press release. “Today’s investments, paired with our targets for 2030 and 2040, continue to lay the groundwork for Canada’s role as global leader in clean transportation.”

Affordability still an issue

Last week’s announcement expanded on the government’s commitment in Budget 2022 to allocate a further $1.7 billion to extend the iZEV program through to March 2025. From the program’s launch in May 2019 up to March 31 of this year, more than 141,000 EV and PHEV buyers received rebates, according to Transport Canada.

The iZEV program revisions are a response, in part, to criticism that the original program excluded too many EVs, given their generally higher retail prices than many gas-power vehicles. In this context, Joanna Kyriazis, clean transportation program manager at Clean Energy Canada, called last week’s changes “good news” for Canadians considering an EV for their next vehicle, in a statement.

Daniel Breton, president and CEO of Electric Mobility Canada, says in an interview with Electric Autonomy Canada that his organization believes the announcement is “great news” and that it is nearly “almost verbatim what we proposed” in EMC’s own 2030 action plan released in November 2021.

“We were very aware last year of the fact that more EVs coming to market are going to be SUVs and pickup trucks and they are more expensive. If we don’t adjust the rebate to reflect what people want, we would end up not being able to reach any kind of target that we’re aiming for.”

However, David Adams, president and CEO of the Global Automakers of Canada, says the government needed to go farther — by increasing the rebate amount — if Canada wants meet its 2035 zero-emission vehicle sales targets.

“At the end of the day, you’re probably only going to get, maybe, a couple of dozen extra models that would be eligible [with the current changes]. I think the real issue is not necessarily the eligibility limits, it’s the overall affordability of EVs,” says Adams, in an interview with Electric Autonomy.

“If affordability is still an issue — which is which it is, especially in a highly inflationary environment where consumers are being tapped out a little bit more on their personal budgets for their regular household living expenses — then not increasing the [rebate] amount is not helpful in terms of getting more people into the electric vehicles.”

Policies and targets must align

“I think at the moment there is a misguided assumption that the battery price continues to move rapidly down the cost curve and we’re not seeing that,” says Adams of the ongoing market fluctuations and trade insecurity around critical battery minerals and the impact that has on the auto industry being able to make affordable EVs. “The reality is that cost is still a big issue.”

CEC’s Kyriazis, in her statement, echoed that rising battery material costs are driving up prices (particularly in Tesla’s case — one of the most popular EV brands in Canada). However, in her view, the expanded federal iZEV rebate for EVs “strike the right ‘Goldilocks’ balance… . These new vehicle cost caps, while more generous, still send a strong signal to automakers: price your vehicles accordingly.”

But looking ahead — and at the government’s own targets — Adams says there’s a lack of alignment between the iZEV program’s reach and the government’s sales goals.

In March the government unveiled its 2030 Emissions Reductions Plan, in which it confirmed Canada’s commitment to implementing a zero-emission vehicle sales mandate. Under the yet-to-be-finalized rules, 20 per cent of new passenger vehicles sold in the country will be ZEVs by 2026, at least 60 per cent by 2030 and 100 per cent by 2035.

With national ZEV penetration (including plug-in hybrids and battery electric, by StatsCan’s definition) in Canada averaging just 5.2 per cent in 2021 (6.2 per cent in Q4), there is a lot of ground to make up in just four years.

“All of the numbers that the government has announced…sound impressive, but then I think the real question is to ask: compared to what?” says Adams.

“$1.7 billion is a lot of money and we shouldn’t discount that. But if you divide that amount by the $5,000 maximum incentive amount, that’s 340,000 to 380,000 vehicles. If you just look at the [ZEV mandate] number in 2026 — 20 per cent of 1.7 million [annual] sales volume — that would be the 20 per cent just for that one year.”

Breton echoes a similar statement, but says the issue of meeting the sales targets has less to do with affordability as it does with simply having any available supply.

“Over the weekend, I was at the Montreal EV show. The place was jam-packed with people interested in buying electric cars and most manufacturers were telling those potential customers, ‘Well, it’s a year to two years to three years to get your hands on a car,'” says Breton.

“So the issue is not the rebate being high enough. It is the fact that there are no cars on the lots. It’s not going to cost much of anything for those rebates from the federal government if people can’t buy any ZEVs.”

Other adoption obstacles

Another area the expanded federal rebate misses is used EVs, which is one of the main equity pillars of the ZEV transition with many drivers seeing the resale market as their only option to own an EV.

While not directly related to the ZEV mandate, which currently only specifies new vehicle sales, making it easier for car buyers to afford used EVs can help accelerate the overall transition from combustion vehicles.

Meanwhile, on the other side of the income spectrum, is the luxury tax levy the government introduced last year on all vehicles over $100,000. Electric vehicles are not exempt from this tax, even though many of the models available on the market tip over the $100,000 threshold. This, says Adams, is an unhelpful policy to overall adoption.

“When you look at the folks that are buying EVs, generally they tend to be higher income individuals,” explains Adams.

“Not being taxed as an electric EV provides wealthy consumers with the incentive to purchase an EV instead of a combustion vehicle. It just seemed completely inconsistent public policy that the Canadian government would want to put more EVs on the road, but would be denying a very simple exemption to facilitate getting more EVs on the road at the luxury end.”