The CAQ government is confident the province’s EV transition will continue without sales incentives beyond 2027. Reaction there and in the rest of Canada is mixed

The Quebec government’s decision to phase out its purchase rebate for electric vehicles by 2027 is proving to be a litmus test for views on the strength of the EV transition.

Quebec’s Coalition Avenir Québec (CAQ) government said last week it plans to end the Roulez Vert EV rebate program by 2027 in its Budget 2024. It said the rebate program, introduced in 2012, was “necessary to begin the electrification of the vehicle fleet in Quebec at a time when there were few models available, with more limited capacity, and when the charging network was emerging.”

Now, the government feels the EV market in the province is ready to take off on its own.

Starting Jan. 1, 2025, the current $7,000 incentive offered to those buying full battery-electrics (BEVs) will fall to $4,000. A year later, in 2026, it’ll go down to $2,000 and, by 2027, no incentives will be given. Plug-in hybrids (PHEVs) currently eligible for a $5,000 subsidy will receive $2,000 next year, $1,000 in 2026 down to nothing in 2027.

EV advocate response

The news about the future of Quebec’s incentives was met with mixed reactions from local EV advocates.

“We already knew 2027 would be the year [subsidies end],” says Simon-Pierre Rioux, founder of the Association des Véhicules Électriques du Québec, in an interview with Electric Autonomy.

“What we’re surprised by is the scale and rapidity of the changes. We thought that it would be a gradual thing starting in 2027 and would probably go down $1,000 every year.”

Advocates from the Corporation des concessionnaires d’automobiles say it’s too early to cut the program because without the incentives some Quebecers can’t afford EVs.

The Canadian Vehicle Manufacturers’ Association echoes these sentiments. They point to the fact that price parity has not yet been reached between EVs and conventional gas vehicles.

Rioux says he is disappointed the government didn’t follow through with a recommendation on adding a tax to gas cars.

“A tax on gas-guzzling cars and pollution emitting SUVs and bigger cars would have helped sway [buyers] towards electric cars.”

Consequence of the new policy

Among the provinces, Quebec is a leader in EV adoption. In Q4 2023, zero-emission light-duty vehicle registrations (BEVs and PHEVS combined) reached a record 21.4 per cent market share, exactly equal with British Columbia, according to according to Statistics Canada. On a volume basis, Quebec led the country throughout 2023, with 77,083 new ZEVs registered. Ontario was a distant second at 49,803.

The Global Automakers of Canada writes on Linkedin that “raising the ZEV mandate targets and then phasing out the purchase incentive risks Quebec’s progress in ZEV adoption.”

By the end of 2024, Rioux suspects potential EV buyers will look elsewhere if the EV they’ve ordered is delayed. It may also prompt them to explore brands with shorter delivery times. Looking ahead to 2025, the $3,000 incentive reduction could further influence consumer decisions, says Rioux. This could be especially so if it coincides with changes to the federal incentive program.

Consumers are already indicating they are not happy with the incentives rollback.

A post-budget survey from Quebec-based news outlet, Le Journal-TVA Nouvelles, finds over 50 per cent of Quebecers think removing the rebate is a “bad measure.” Thirty-four percent say they will reconsider purchasing an electric car, with 20 per cent opting for a less expensive model. One in four said they would no longer plan to buy a vehicle without a subsidy. Meanwhile, only six per cent of prospective buyers intend to move forward with their plans to buy an EV.

Whither the federal sales incentive?

Currently, the federal Incentives for Zero-Emission Vehicles (iZEV) Program will expire on March 31, 2025.

During a campaign stop in Windsor, Prime Minister Justin Trudeau wouldn’t comment on the iZEV rebate past 2025, according to Automotive News Canada.

The federal government’s annual budget will be tabled on April 16.

The fate of the iZEV program may be made clear then, but before any decision to discontinue the rebate program is made, Sarah McBain, senior analyst at the Pembina Institute, says she hopes the government will follow the EV market closely.

“Fiscal incentives in general are quite essential for shifting demand towards EVs and things like purchase subsidies were really designed to reduce that price gap between an EV and a conventional gas car,” explains McBain in an interview with Electric Autonomy.

“Phasing out can make sense but I think it needs to be done by monitoring and aligning it with falling EV prices [because]…to keep that policy in place until the price gap is closed. The implication of not doing so potentially means slowing down EV ownership.”

One cautionary example of that is currently unfolding in Germany. According to an Institute for Energy Research report, EV sales are projected to drop by 14 per cent this year. This follows the abrupt withdrawal of subsidies in December 2023 and marks Germany’s first decline in EV sales since 2016.

The reason for the decline, says the report, is because the “upper end of the EV market is almost saturated.” At the same time, there are limited options available for vehicles at lower prices of around €25,000 ($27,000).

What about other provincial rebates?

As for other provinces following Quebec’s lead, Joanna Kyriazis, director of public affairs and the transportation lead at Clean Energy Canada, doesn’t think it’s likely.

“Quebec has had the rebate in for longer than any other province. It really did get a head start on EV adoption. Almost every other province — except for B.C. — just announced their EV rebates two years ago,” says Kyriazis. “Most provinces are at a different stage of EV adoption than Quebec. I see the provinces, hopefully, keeping their rebate programs in for another number of years — maybe extending them longer.”

She adds: “I also hope to see the provinces that have not yet stepped up like Alberta, Saskatchewan, Manitoba and Ontario, do so.”

British Columbia implemented its most recent change to its Clean BC’s Go Electric EV rebate program in 2022. The update increased incentives from $3,000 to $4,000 but introduced a clause tied to buyers’ total gross annual income. Individuals earning $100,001 and above are not eligible for the rebate.

Kyriazis says she would have liked Quebec to have considered this approach on spending for their EV rebate program.

“This way the rebate dollars can go further…and also help drivers who need the most support to switch.”

In addition to rebates, British Columbia offers an exemption from provincial tax for used ZEVs.

“Maybe that portends what the future incentive could look like if there are no more rebate monies available, but governments want to continue to provide some sort of incentive,” says Kyriazis.

“Waiving sales tax on new or used EVs is always an option. ”

Quebec’s cap-and-trade system also a factor

Quebec’s decision to scrap the rebate program also has its supporters.

Christopher Ragan, an economist and associate professor at McGill University, says it was the right move.

“Everybody wants to receive a subsidy, but they end up being a very expensive way to accomplish a particular outcome,” says Ragan.

Between April 2023 and January 2024, the Roulez Vert program cost the government $400 million. It is likely to increase this year.

Notably, the government is ending the program in a budget that has a projected deficit of $11 billion, the largest deficit in the province’s history. (Though, Rioux points out, the rebate comes from the Green Fund, mainly financed by Quebec’s carbon market.)

From Ragan’s perspective, the subsidy program was never able to achieve one of the government’s main goals of reducing emissions. This is because of Quebec’s cap-and-trade system, which regulates the total emissions allowed in the province. Subsidizing EVs won’t necessarily reduce overall emissions because it only shifts emissions from one source to another.

“As long as the cap is coming down by three or four per cent a year…then emissions will go down three or four per cent a year. It doesn’t matter whether you subsidize EVs or not,” says Ragan.

If the goal is to boost EV adoption, the cap-and-trade system is also doing its part there too, adds Ragan.

“The cap-and-trade system is driving up the price of gasoline,” says Ragan.

“You don’t know that because the…system is a very behind-the-scenes, hard-to-see thing. Our gasoline in Quebec is higher because of the cap-and-trade system. As the price of gasoline goes up, people are incentivized to drive less and to make their next car an electric car.”

Building the right policy conditions

Another way to encourage more EV adoption is building out the networks of EV chargers, says Ragan.

In September, the Quebec government announced it plans to spend $514.5 million to install 116,700 public chargers by 2030.

“EVs become more affordable when a vast charging network supports it because consumers end up being more open to purchasing an EV with shorter range when they know that they can really rely on a charging network and charge easily,” agrees Pembina’s McBain.

Along with a robust public charging network, Quebec’s other EV policy measures include regulatory tools such as a stringent ZEV sales mandate, the federal government’s Electric Vehicle Availability Standard, clean and affordable electricity rates and building code requirements for new buildings and new homes to ensure EV-readiness.

“All of those conditions make owning an EV in the province makes a lot of sense,” says McBain.