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Key takeaways
- Canada's EV market is facing challenges due to policy shifts, rising costs, and uneven infrastructure despite increasing sales.
- Key government incentives have ended, complicating pricing strategies for OEMs and affecting EV demand in North America.
- Critical minerals and strategic partnerships are essential for Canada to maintain its role in the North American EV supply chain.
Since our Osler Legal Outlook article in 2023, Canada's efforts to establish itself as a powerhouse in the global electric vehicle (EV) market and supply chain ecosystem have undergone a recalibration. Over the past 24 months, EV sales have increased in Canada and North America, but they continue to fall short of forecasts from early in the decade. The outcome of the 2024 U.S. presidential election set the stage for significant EV sector policy changes in 2025, while Canadian federal and provincial measures for the industry have also shifted.
Together, these developments have introduced complexity for parties seeking to engage in long‑term planning. However, they also create opportunity for a more pragmatic and durable pathway forward, focused on infrastructure, critical minerals and continental supply chain resilience.
Headwinds: policy shifts, cost pressures and industry correction
A recent survey conducted by The Globe and Mail suggests many Canadians support the EV transition, with 35% of respondents contemplating the purchase of an EV. At the same time, it confirmed that consumer concerns regarding affordability and range anxiety remain the most significant obstacles to mass adoption.
Governments did not help to address the affordability concern in 2025. The early end of the federal Incentives for Zero‑Emission Vehicles (ZEVs) program (iZEV) in January 2025 removed a $5,000 consumer purchase rebate for eligible ZEVs. Québec's Roulez Vert program is being phased out by 2027, with rebates reduced from $7,000 in 2024 to $4,000 in 2025 and $2,000 in 2026. South of the border, the U.S. administration eliminated several important EV‑related incentives in 2025, including federal tax credits of up to US$7,500 for new EVs and up to US$4,000 for used EVs. The EV charger tax credit that provided a 30% rebate of up to US$1,000 for residential chargers and up to US$100,000 for industrial installations has also been eliminated. U.S. federal fines tied to fuel efficiency and emissions standards are also being rolled back. The result is softening demand signals and complications regarding pricing and inventory strategies for original equipment manufacturers (OEMs) across an integrated North American market.
Charging infrastructure growth is also a significant hurdle to wider EV adoption, as we wrote in our Osler Legal Outlook article in 2024. This issue continues to be a concern in Canada and improvement remains uneven. Charging networks are expanding. However, the slow pace of deployment has done little to alleviate range anxiety in many regions, especially given the country's geography, climate and intercity travel patterns.
Geopolitics and trade policy have created an additional challenge to Canada's EV ambitions. Earlier in 2025, as described in our Osler Update, the U.S. imposed a 25% tariff on automobiles and automobile parts, with an exception for parts qualifying for preferences under the Canada-United States–Mexico Agreement (CUSMA). The result has been to materially increase costs across North American supply chains. At the same time, with the objective of securing a non‑adversarial supply, the U.S. has elevated critical mineral security to a national priority, deploying innovative financial tools and strategic investments, including international partnerships and direct investments in mining and processing companies.
High‑profile insolvencies and restructurings in the EV ecosystem have served as cautionary tales for market participants. In notable instances, ambitious growth plans have not been realized and government partners have shouldered significant losses. Swedish battery manufacturer Northvolt, the Toronto‑based battery recycler Li‑Cycle and the electric bus manufacturer Lion Electric have faced financial distress, highlighting the hazards of rapid expansion in a capital‑intensive, policy‑sensitive EV sector.
In Québec, Northvolt's subsidiary became subject to proceedings under the Companies' Creditors Arrangement Act (Canada). The government sought to recover a $240-million loan to the subsidiary after its $270-million equity investment in the Swedish parent was lost following a high‑profile global bankruptcy. In both the Lion Electric and Northvolt proceedings, the Québec government declined to inject the additional funds requested by their potential buyers.
Countervailing forces: regulatory flexibility, infrastructure and critical minerals
Even as momentum moderates, several developments point to a more measured transition. On September 5, 2025, as discussed in our Osler Update, the federal government announced a temporary one-year pause of the federal ZEV sales mandate for 2026 model year vehicles and a 60‑day review of the Electric Vehicle Availability Standard. Québec partially lifted its 100% ZEV mandate for 2035 by reducing it to 90%. Similarly, British Columbia has recently signaled its intention to lower its EV sales mandate to better align with the updated federal guidelines once published. Québec also revised escalating targets from 2026 to 2035 and expanded the definition of ZEVs to include plug‑in hybrids (PHEVs), consistent with the federal approach. Harmonization of provincial and federal approaches regarding PHEVs provides regulatory breathing room for OEMs and dealers to balance product mix and manage inventories. At the same time, however, it may also slow the near‑term pace of full EV adoption.
Charging infrastructure installation continues to expand. These initiatives are led by private developers that are supported by financing from the Canada Infrastructure Bank (CIB), grants from Natural Resources Canada and other government assistance. Notably, CIB's Charging and Hydrogen Refueling Initiative is actively funding private charger networks. Additionally, there continues to be significant growth in electric fleets, including for school buses, last‑mile delivery, car rental businesses and transport trucking.
Canada's evolving defence posture is also reshaping business opportunities, including through an increased emphasis on integrating EV technologies and critical minerals into secure supply chains. However, the surge in precious metal prices has not extended to many battery metals, leaving several projects stalled while project proponents pursue construction financing and offtake agreements. Integrated battery manufacturing plans tied to mine development have also encountered financing and technical challenges.
Overall, delays compared with early projections are not surprising given the transformative nature of the EV transition. The current public policy focus of the federal government on nation‑building infrastructure, streamlining regulatory approvals and advancing Indigenous reconciliation is beginning to move long lead-time critical mineral projects from concept toward execution. This is an essential prerequisite for downstream battery and vehicle manufacturing. In the meantime, all levels of government continue to support new mines and battery manufacturing facilities. Such support includes targeted funding for strategic projects and enabling infrastructure such as dedicated electricity generation and transmission.
Foreign investment in Canadian mining companies advancing critical mineral projects is aligning with these priorities. The U.S. government's increased interest in investing in critical minerals businesses and engaging with Canadian critical minerals reflects a recognition that access to inputs is inseparable from industrial competitiveness and national security. This, in turn, reinforces Canada's role within a continental strategy and provides further evidence to support the fact that government funding and offtake arrangements for projects can de‑risk multi‑billion‑dollar projects.
Finally, although several OEMs have invested billions in new models, plants and supply chains, and have been faced with the difficult decisions to postpone, scale back or cancel programs, one may hope that ongoing discussions with the U.S. government about the review of CUSMA could potentially create an avenue to stabilize trade rules and planning horizons.
Pragmatism, optionality and execution expected in the year ahead
The narrative for 2025 is not retreat but recalibration. Near‑term demand softness, uneven infrastructure and policy turbulence have tempered earlier optimism. Yet regulations are adapting, charging infrastructure is expanding with greater discipline and critical minerals strategies are aligning with national security priorities. If governments continue to balance ambition with operability by coordinating regulations, aligning infrastructure with executable use cases and advancing predictable trade and investment rules, Canada may be able to convert today's challenges into durable advantages.
While tempered, Canada's EV ambitions remain directionally intact. The coming year will clarify how far and how fast the country can advance toward its EV ambitions, and on what terms. Success will depend less on headline announcements and more on steady execution through building charging infrastructure and market resilience that consumers can trust. Moving forward, it will be critical to find solutions to make EVs more affordable. It is also essential to create and support supply chains from the mine to manufacturing to maintenance that are more integrated within the North American automobile sector. Finally, it is crucial to accelerate critical nation-building projects and advance a renewed continental trade and security framework. All of these factors are needed for Canada's success in its long‑term investment in the EV transition.
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