Canada’s EV Incentive Program is Out of Money, Automakers Unhappy

The government of Canada announced this week that the Incentive for Zero Emissions Vehicles (iZEV) program is officially on pause because all of the funds allocated to it have been spoken for. Unfortunately, it’s not yet clear when funding will return. While that reflects well on sales of zero-emissions vehicles in the country, it’s bad news for consumers and automakers.

Transport Canada introduced the iZEV program in 2019, and through it, consumers could apply for a tax rebate of up to $5,000 when they purchased a zero-emissions vehicle (ZEV), such as an electric vehicle (EV) or a plug-in hybrid (PHEV).

As part of Budget 2022, the program received funding until March 2025 or until the $2.3 billion dollars allocated to it had been dolled out, which is precisely what has happened. From the federal government’s point of view, that’s a sign of the program’s value.

“The iZEV Program has been a huge success,” wrote Transport Canada, in a statement. “Over 546,000 vehicles have been incented through this program since it began, helping Canada reach a new ZEV market share of 11.7 per cent in 2023, a significant increase from 3.1 per cent in 2019.”

Consumers may be less optimistic about the decision, since it will leave some of them with a vehicle that costs $5,000 more than expected. According to Transport Canada’s website, buyers who purchased a new ZEV before the pause was announced (January 12, 2025) are not entitled to a tax break if the dealer through which they bought their vehicle did not submit an eligibility assessment application on time. If a vehicle has been approved, though, that means that it got in before the pause, and the incentive will honoured.

Unfortunately, it is not yet clear when the program will restart, if at all. Zero-emission vehicle buyers can continue to submit eligibility assessment applications in the hopes of receiving a tax break if the program receives more funds. However, given the current political climate, it is not clear that the program’s coffers will be filled again.

The pause of the incentives program has also upset vehicle manufacturers and dealers.

“The end of the federal consumer EV purchase incentive program while maintaining Electric Vehicle mandates will be a disaster for consumers, dealers, manufacturers and the Canadian economy,” said Tim Reuss, president and CEO of the Canadian Automobile Dealers Association (CADA), in a statement.

The organization, along with the Canadian Vehicle Manufacturer’s Association (CVMA), is calling on the federal government to end ZEV mandates as a result of this expected pause in federal funding. As part of the government’s 2030 Emissions Reduction Plan, the country plans to require that 100 per cent of new light vehicles sold in Canada are ZEVs by 2035.

The CVMA cited a slowdown in the expansion of Canada’s public charging infrastructure as part of the reason why automakers and dealers should not be required to meet tightening sales restrictions. However, a report from the Auditor General of Canada suggests that the nation is on track to meet its target of installing 33,500 chargers by 2026.

The pause in the federal iZEV program has no impact on provincial incentives for electrified vehicles. However, the provinces are facing similar situations. Quebec recently announced that its program has run out of money, leading to a pause of its own. Although the incentives will resume in February, the province will then only offer rebates of up to $4,000, not $7,000 as was previously offered. British Columbia also plans to reduce its rebate program to the same amount, while Newfoundland and Labrador will discontinue its $2,500 provincial incentives program on March 15.

All cite the popularity of their programs as the reason for the shrinking ZEV rebates. While fiscal responsibility is a popular cause, it will have to be balanced against the existential threat of climate change. Transportation remains the second-largest contributor to Canada’s overall emissions behind the oil and gas sector. However, since 2022, the transportation sector’s slice of the emissions pie has fallen from 25 per cent to 22 per cent.