Canada Scraps 2035 Gas Car Ban for EV Incentives

Canada’s government is set to scrap its planned 2035 ban on new internal combustion engine cars, shifting its strategy toward promoting electric vehicles through new incentives and stricter fuel standards.

According to reports citing government and auto industry sources, the Mark Carney administration will officially announce a new automotive strategy that pivots away from a hard deadline for phasing out gasoline-powered vehicles.

A New Strategy: Subsidies and Tighter Standards

The new plan replaces the 2035 ban with a combination of consumer incentives and industry regulations. Key components of the new policy are expected to include:

• Tax Relief for EV Buyers: A subsidy of C$5,000 (approximately $3,660) per electric vehicle to encourage adoption.

• Infrastructure Investment: A C$1.5 billion fund dedicated to building out Canada's EV charging infrastructure.

• Stricter Fuel Efficiency Rules: New, potentially tighter fuel efficiency standards will be implemented for all new vehicles.

This approach signals that the government remains committed to transport electrification but is changing the method to achieve its goal.

Responding to Auto Industry Pressure

The policy shift is seen as a major concession to Canada's automotive industry, which strongly opposed the previous EV mandates. The original targets required EVs to account for 20% of sales in the near term, rising to 60% by 2030 and a full 100% by 2035.

Automakers argued these goals were unrealistic and impossible to achieve within the proposed timeline. They also raised concerns that a forced transition to EVs would be expensive for consumers and limit their vehicle choices.

Protecting Canadian Auto Jobs from US Tariffs

Another critical driver behind the new strategy is a move to protect the domestic auto sector from U.S. trade policy. The government plans to prioritize support for companies that manufacture cars in Canada, aiming to safeguard thousands of jobs.

This measure is a direct response to tariffs imposed by U.S. President Trump last year on foreign-made automobiles, creating pressure on Canada's export-oriented auto industry.

A Mandate in Disguise?

While the direct ban is being removed, it remains uncertain if the auto industry will fully embrace the new terms. The use of stringent fuel efficiency standards has been employed elsewhere as an indirect way to mandate EV sales.

California offers a prominent example. The state has implemented such demanding emissions rules for light vehicles that it is difficult for most carmakers to comply without selling a significant number of zero-emission vehicles. This raises the question of whether Canada's new policy will achieve a similar outcome, effectively pushing the market toward EVs without an explicit ban.