The federal government has set a new direction for Canada’s auto sector with an industrial strategy that tightens greenhouse gas standards, repeals the electric vehicle mandate, brings back rebates and adds funding to spur domestic production, investment and demand for electric vehicles.
Framing the plan as a push to reduce reliance on a single trade partner, the government said more than 90 per cent of Canadian-built vehicles and 60 per cent of Canadian‑made auto parts are exported to the United States. The new industrial strategy aims to diversify trade, back core Canadian industries and launch a national electricity strategy.
The auto plan seeks to reward made-in-Canada vehicle production and tap Canada’s strengths in artificial intelligence and technology. New funding will include $3 billion from the Strategic Response Fund and up to $100 million from the Regional Tariff Response Initiative to help manufacturers adapt, grow and expand into new markets. The government will also use the Productivity Super‑Deduction and reduced corporate tax rates for zero‑emission technology manufacturers to encourage investment.
Regulatory changes will pivot from a model-specific mandate to outcome-based standards. Ottawa will introduce stronger fleetwide greenhouse gas standards that set a path to 75 per cent EV sales by 2035 and 90 per cent by 2040. By doing so, the federal mandate for 100 per cent EV sales by 2035 are now gone. This, the government said, gives automakers flexibility to use a wider mix of technologies in the near term while driving EV adoption over time.
Now added to the mix is a five‑year EV Affordability Program that will offer up to $5,000 in purchase or lease incentives for battery electric and fuel‑cell vehicles and up to $2,500 for plug‑in hybrids. Incentives will apply to vehicles with a final purchase price up to $50,000 made in countries that have free trade agreements with Canada. The $50,000 cap will not apply to Canadian-made EVs and PHEVs.
The government will also invest $1.5 billion through the Canada Infrastructure Bank’s Charging and Hydrogen Refuelling Infrastructure Initiative to expand the national charging network.
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Trade measures will aim to strengthen competitiveness and diversify partners. Ottawa will bolster the automotive remission framework to reward companies that produce and invest in Canada and will maintain counter‑tariffs on U.S. auto imports to preserve a level playing field. The government highlighted a memorandum of understanding Korea on future mobility and said Canada has agreed to a new strategic partnership with China and allow a fixed volume of Chinese EV imports.
Worker supports are part of the package. A new work‑sharing grant is intended to prevent layoffs and support retention. Ottawa will create a workforce alliance of industry, labour and training partners and provide employment and reskilling supports for up to 66,000 workers with a $570 million investment.
“The choices we make now will shape the Canadian auto industry for decades to come,” an announcement from Prime Minister Mark Carney said. “By protecting the industry and incentivising automakers to build here, we can transform Canada’s workers and businesses to compete and win in this new global environment.”
Industry response
AIA Canada highlighted the need to keep right to repair as a key focus amid all the changes, especially as it relates to electric vehicles.
“AIA Canada looks forward to reviewing the government’s new auto strategy in greater detail and continuing to engage with policymakers to ensure the aftermarket is positioned to support Canadians throughout the transition to advanced vehicle technologies,” it said in a statement to Auto Service World.
The Canadian Automobile Dealers Association is backing Ottawa’s new auto strategy, praising the decision to end the federal electric vehicle mandate and to refocus on measures that dealers say align with consumer demand and today’s market conditions.
The group’s president and CEO Tim Reuss said the announcement “is a strong commitment by the government to the automotive industry and demonstrates their ability and willingness to respond to market realities and consumer demand.”
CADA said expanded supports to sustain auto manufacturing arrive at a pivotal moment as Canada enters the next phase of CUSMA talks with the U.S. Dealers “particularly applaud the government for ending the EV mandate and choosing a better path forward for EV adoption that is more in line with diverse technology, charging infrastructure and overall consumer demand.”
Reuss pointed out that dealers are not walking away from electrification.
“Dealers have invested heavily in EV infrastructure to sell and service EVs in Canada. Consumer choice in terms of vehicle options for low emission choices has expanded dramatically in Canada, and now manufacturers have the ability to deliver emissions solutions which are technologically neutral”.
CADA also welcomed the return of EV purchase incentives. The association said the announcement “highlights that consumers still need incentives in order to adopt electric vehicle technology.”
It called the up-front price gap a continuing “pinch point” and said “the government’s approach to incentivizing consumers as opposed to limiting the market is the right step to ensure consumer affordability.”
The association pointed to elements of the strategy aimed at supply chain resilience and trade stability.
“During this trade rupture, it is critical that we have a strategy that is bold and eliminates policies that were made before current market and technology realities,” Reuss said. “CADA continues to work on both sides of the border to highlight that auto tariffs between Canada and the US are bad for the economies of both countries, bad for dealers and, most importantly, bad for the millions of consumers they serve.”
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