Canada’s electric vehicle sales continue to climb despite reports of slowing growth in the sector, but supply chain bottlenecks could affect the country’s long-term manufacturing ambitions.
Zero-emissions vehicles (ZEV) adoption hit an all-time high in Canada toward the end of last year, making up 16.5% of all new vehicle registrations in the third quarter. The sector is expected to continue growing, even though it took a slight hit after the federal government paused its iZEV incentive program, experts say.
“The recent end to federal EV rebates is likely to slow down adoption in 2025 compared to our earlier forecast,” Aleksandra O’Donovan, head of electrified transport at BloombergNEF, told The Energy Mix.
BloombergNEF has yet to update its 2025 forecast following the iZEV program’s suspension, but O’Donovan said the decision probably “shaved off some of the otherwise expected peak in EV sales.”
But even so, “beyond 2025, Canada’s zero emission vehicle mandates will keep the EV market growing, by pushing automakers to grow EV sales in the country and to introduce affordable EV models,” O’Donovan added.
Reports of an EV growth slump emerged in 2024 after several automakers and battery manufacturers scaled back production plans. But key to that framing is that growth had slowed—not stopped nor reversed. Global EV sales rose 25% last year, with especially high growth in China, and less in Europe. Sales in the United States and Canada grew by 9%, reports Barrons.
Sales growth was slower in 2024 than in previous years that saw increases of 103% in 2021, 60% in 2022, and 33% in 2023. But this does not signal the demise of an all-electric vehicle future. Some analysts suggest the narrative deceivingly implies that consumer demand is waning, when the real barrier is a lack of affordable options. Automakers are able to squeeze more funding from governments by making the transition to electrified transport seem more difficult, reports the Toronto Star.
Still, steady EV growth is key to federal and provincial ambitions of building up Canada’s EV manufacturing supply chain. Lagging EV demand was cited as the reason battery manufacturer Umicore paused construction of a facility in Ontario. And in Quebec, where Northvolt says it is still moving forward with plans for a factory, the parent company in Sweden declared bankruptcy when battery demand didn’t meet expectations.
Battery manufacturers are impacted by the size of the EV market, but they are “generally experiencing market dynamics differently,” said BloombergNEF energy storage analyst Evelina Stoiko. Cases like Northvolt’s are not reflective of the entire industry, and even in that case there were other factors at play.
Several other battery and EV projects are in the works, after Canadian governments courted companies like Volkswagen and Honda with subsidies. Those offers include construction support funding, but also production subsidies linked to volume, which is tied to EV demand. Auto industry insiders are indicating that the final amounts for these subsidies will be less than expected due to “ headwinds in EV sales,” reports the Financial Post.
Amid these challenges, Canadian governments have raised about $100 billion in public and private investment for projects that build and expand the EV manufacturing sector. But many of the projects have not yet started, and only part of the $31-billion in support promised by federal lawmakers has been distributed as Prime Minister Justin Trudeau prepares to leave office in a few months—to potentially be replaced by a government that would undo those policies.
“We have reshaped the industrial landscape of this country,” Industry Minister François-Philippe Champagne told a Canadian Club luncheon last week. “I would wish that we don’t reverse that because I think that we have prepared Canada best for the 21st century.”
