By Paul Vieira
OTTAWA--Canada is ditching its electric-vehicle sales mandate and replacing it with more stringent tailpipe-emissions standards for automobiles that officials project will spur carbon reduction equal to 75% EV sales by 2035.
The measure is part of the government's revamped automotive strategy, which officials say aims to make Canada's auto industry less reliant on the U.S. and gas-powered vehicles, and to transform the country into a global leader in EV production. The shift to tougher tailpipe-emission standards is also in contrast to the U.S., where the Trump administration has eased or rolled back Biden-era fuel-economy standards.
The measures come as trade tensions escalate between the U.S. and Canada, in part because of Canada's decision to sharply lower tariffs, from 100% to about 6%, on some imported EVs from China. Prime Minister Mark Carney said the trade arrangement with China, which also involves lower tariffs on Canadian agricultural products, envisages increased investment by Chinese EV makers in the Canada economy. General Motors Chief Executive Mary Barra warned the Canada-China pact threatens North American auto manufacturing.
The domestic auto sector is under strain, as Canadian-made cars face a 25% U.S. tariff. Canada estimates that over 90% of Canadian-made vehicles and 60% of Canadian-made auto parts are currently exported to the U.S. The auto tariffs will be a focal point as Canada, the U.S. and Mexico enter talks later this year on the renewal of the U.S.-Mexico-Canada trade pact, or USMCA.
"Our objective is to remove all tariffs in the auto sector to build the strongest North American auto sector, together. But that is not the current objective of the U.S. administration," Carney said, as he unveiled the strategy at a suburban Toronto auto-parts plant. "Their approach has changed, so we must prepare for all possibilities. We must take care of ourselves."
Canada paused implementation of its EV sales mandate in the fall, following lobbying by the auto industry, which would have required 20% of 2026 automobile sales to be of the EV category.
The focus of the new strategy is a more stringent carbon-emissions standard for vehicles, starting with the 2027 model year to 2032. Officials say the finalized rules will emerge later this year, and that they will ultimately lead to emission reductions equivalent to 75% of all 2035 automobile sales falling into the EV category.
Officials said the measures are an attempt to prepare the Canadian manufacturing sector for the production of EVs as demand grows for such automobiles. Canada, under former Prime Minister Justin Trudeau, had already pledged about $20 billion in subsidies toward the production of EV batteries in Canada, by Volkswagen and a joint venture between Stellantis and South Korea's LG Energy.
Repealing the EV sales mandate with stronger tailpipe-emissions rules "avoids undue burdens on the Canadian auto industry," Carney said. "This approach will allow manufacturers to use a wide array of technologies to meet the standards and respond to consumer preferences in the near term, while driving EV adoption over time."
Carney's strategy also reintroduces a rebate program for Canadians who purchase EVs from countries that Ottawa has free-trade agreements with, thereby excluding EVs from China. It also pledges bigger investment in EV-charging infrastructure.
Reaction to Carney's revamped auto-industry plan was mixed.
The Canadian Vehicle Manufacturers Association welcomed the repeal of the EV sales mandate, saying it will provide stability over the medium term. The group also applauded a return of EV sales rebates and a pledge to invest heavily in new EV-charging infrastructure, saying those measures should help fuel EV adoption.
Pembina Institute, a clean-energy think tank, said that until the regulations are finalized and in force, "Canada will have no policy meaningfully driving down vehicle emissions, and any delay locks in emissions for years to come."
Write to Paul Vieira at paul.vieira@wsj.com
(END) Dow Jones Newswires
02-05-26 1421ET
