In a significant pivot for Canada’s automotive landscape, Prime Minister Mark Carney announced on Thursday, 05 February 2026, that the federal government is scrapping the controversial electric vehicle (EV) sales mandate in favour of a multi-billion dollar incentive-based strategy.
The new national automotive strategy, unveiled in Vaughan, Ontario, replaces the previous Liberal administration’s requirement that all new light-duty vehicles sold in Canada be zero-emission by 2035. Instead, the Carney government is shifting focus toward consumer rebates and stricter fuel-efficiency standards to drive decarbonization.
The New Rebate Structure
Beginning 16 February 2026, the federal government will relaunch a purchase incentive program aimed at making cleaner vehicles more affordable for the middle class. The $2.3-billion program includes:
- $5,000 Rebate: Available for the purchase or lease of new battery-electric vehicles (BEVs) and hydrogen fuel-cell vehicles.
- $2,500 Rebate: Available for plug-in hybrid electric vehicles (PHEVs).
- Price Cap: Incentives are primarily targeted at vehicles with a sales price under $50,000 to ensure the subsidies benefit average consumers rather than luxury buyers.
The Prime Minister noted that these incentives are designed to be front-loaded, with the subsidy amounts expected to decrease annually as the market matures and manufacturing costs drop.
Strategic Shift from Mandates to Markets
The decision to repeal the sales mandate—which would have required 20% of new sales to be EVs by 2026—comes after intense lobbying from the automotive sector and concerns regarding infrastructure readiness. Carney, who also cut the consumer carbon tax upon taking office, described the move as a “market-driven” approach to climate goals.
“Our strategy is to establish a comprehensive trade regime that strengthens the global competitiveness of our auto sector,” Carney stated. The plan includes a $1.5-billion investment fund to bolster domestic manufacturing and $1.5 billion specifically earmarked to improve Canada’s charging infrastructure.
Industry and Political Reaction
The move has drawn a mixed response across the country:
- Industry Leaders: Generally welcomed the repeal of the mandate, citing the need for flexibility as they navigate trade relations and supply chain shifts.
- Environmental Advocates: Expressed concern that delaying the transition by roughly five years could hamper Canada’s ability to meet long-term emissions targets.
- Critics: Some analysts argue the new policy is “an EV mandate by another name,” suggesting that the tougher fuel-efficiency standards will effectively force manufacturers to produce more electric models regardless of the formal mandate’s removal.
As part of the broader “transformative” strategy, the government is also expected to introduce new tax breaks for auto parts manufacturers to keep Canadian plants competitive against rising international pressure and shifting trade policies south of the border.