The federal government has formally moved away from its previous requirement that all new vehicle sales be electric by 2035, replacing it with a less stringent framework that senior officials acknowledge is still under development.Under the new auto strategy announced Wednesday in Vaughan, Ont., Ottawa is abandoning the Electric Vehicle Availability Standard, which mandated 100% zero-emission vehicle sales by 2035. In its place, the government plans to pursue emissions reductions equivalent to 75% electric vehicle sales by 2035, rising to 90% by 2040.Prime Minister Mark Carney said the revised approach reflects changing global trade conditions and growing uncertainty in Canada’s largest export market.“Canada’s new government is fundamentally transforming our economy — from one reliant on a single trade partner to one that is stronger, more independent, and more resilient to global shocks,” Carney said in a statement.According to figures released by the Prime Minister’s Office, more than 90% of Canadian-made vehicles and about 60% of auto parts are currently exported to the United States. Since April 2025, Canadian vehicles have faced a 25% U.S. tariff on non-U.S. content, raising concerns about production levels and employment in the sector..Emissions rules not yet writtenDuring a technical briefing following the announcement, federal officials confirmed that greenhouse gas emissions standards beyond the 2026 model year have not yet been established. Draft regulations covering model years 2027 to 2032 are expected to be published later this year through the Canada Gazette.Rather than imposing a binding sales mandate, the new framework will rely on tighter emissions limits for automakers, with the intent of achieving emissions outcomes comparable to 75% EV adoption by 2035. Officials stressed that this figure represents an equivalency target, not a direct requirement..No emissions modeling completedOfficials also acknowledged they have not yet completed modeling to determine how many megatonnes of greenhouse gas emissions the new system would reduce, nor how those reductions would compare with the abandoned 100% EV mandate.They said emissions outcomes will depend on how stringent annual limits are set in forthcoming regulations, with full cost-benefit and emissions analyses to be released alongside draft rules..Billions in federal spending and tax measuresThe auto strategy forms part of a broader federal industrial approach aimed at diversifying trade and increasing domestic manufacturing. It is being advanced alongside a national electricity strategy focused on clean and reliable power supply.Under the plan, Ottawa will spend $3 billion from the Strategic Response Fund and up to $100 million from the Regional Tariff Response Initiative to support auto manufacturers as they adjust operations and seek access to new markets. The government will also rely on existing tax measures, including the Productivity Super-Deduction and reduced corporate tax rates for zero-emission technology manufacturers, to encourage spending on clean technologies and electric vehicles.The government said it will introduce stricter greenhouse gas emissions standards for model years 2027 to 2032, aligning with federal targets of 75% electric vehicle sales by 2035 and 90% by 2040..Consumer incentives and charging network spendingTo stimulate domestic demand, Ottawa will launch a five-year EV Affordability Program with total spending of $2.3 billion. The program will offer purchase or lease incentives of up to $5,000 for battery electric and fuel cell vehicles, and up to $2,500 for plug-in hybrids.For vehicles imported from countries with which Canada has free trade agreements, incentives will apply to models priced up to $50,000. That cap will not apply to Canadian-made electric vehicles and plug-in hybrids.The government also plans to spend $1.5 billion through the Canada Infrastructure Bank to expand the national electric vehicle charging and hydrogen refuelling network..Policy shift still taking shapeWhile Ottawa has framed the revised strategy as a more flexible path toward electrification, officials emphasized that key decisions — including emissions stringency, compliance pathways, and environmental impacts — remain unresolved.Draft regulations are expected later this year, leaving automakers, consumers, and provincial governments waiting for clarity on how the new framework will function in practice and how it will compare to the previously announced 100% EV mandate.Canada’s auto sector supports more than 500,000 workers and remains heavily dependent on U.S. exports, a reality the government says the new strategy is intended to address as global demand and trade conditions continue to shift.
