End of incentives wallop Canadian ZEV uptake in January following banner 2024

Canada’s zero-emission vehicle adoption rate fell by nearly a third in January from December, according to S&P Global Mobility, as the federal government’s incentive program ran out of money and provincial rebate payouts in Quebec were greatly reduced.

Following an “outstanding” 2024, “things have taken quite a bit of a turn,” James Hearn, associate director and product manager of Canada industry performance with the data analytics firm, told Automotive News Canada.

The national ZEV penetration rate clocked in at 18.9 per cent of new light-duty vehicle sales for the fourth quarter and 15.4 per cent for all of 2024, both up more than 40 per cent year-over-year, according to S&P.

Sign up for Automotive News Canada Breaking Alerts and be the first to know when big news breaks in the Canadian auto industry.

Buyers in Quebec were far and away the largest drivers of battery-electric and plug-in hybrid vehicle adoption, accounting for 59.8 per cent of Canadian ZEV sales for the fourth quarter and 54 per cent for the year. ZEVs made up 32.9 per cent of vehicle sales in Quebec last year, with that figure climbing to 42 per cent in the fourth quarter alone.

But results “tanked” in Quebec and across much of Canada in January, Hearn said.

The national ZEV penetration rate fell to 13.3 per cent in January, a decline of 29.6 per cent from December. Quebec’s country-leading ZEV uptake rate fell by half to 21 per cent, according to S&P. Tesla and Chevrolet were among the hardest hit, S&P data shows, with EV sales for the brands down 72 and 65 per cent, respectively, in January from December.

Year-over-year performance, meantime, showed more stable performance for ZEVs. The ZEV penetration rate in January 2025 was up across Canada by 2.9 percentage points from the same month a year earlier, while adoption in Quebec was flat.

The January hangover for ZEV sales was also not wholly unanticipated.

The Quebec government warned in spring 2024 that it planned to phase out its ZEV rebate by 2027. That included reducing payouts to $4,000 from $7,000 at the start of 2025, creating a rush of buyers as the final months of 2024 ticked down.

“Everyone was trying to get those vehicles before they lost the incentives,” Hearn said.

While consumers in Quebec were preparing to have $3,000 shaved off the value of their ZEV rebates starting Jan. 1, the province said Dec. 17 that it would suspend its rebate program entirely Feb. 1 because of high demand.

Further complicating the country’s ZEV outlook, the federal Incentives for Zero-Emission Vehicles (iZEV) program came to an abrupt and chaotic end Jan. 13. The federal rebates were expected to run through March, but funding was exhausted nearly three months ahead of schedule following a last-minute run on the program.

While both programs are officially on pause, it is unclear if the funding pools for either the Quebec or federal incentives will be replenished.

If they aren’t topped up, Hearn forecasts ZEV uptake will likely plateau in 2025.

Any letup in adoption will put achieving Canada’s ZEV mandate in jeopardy. The federal legislation requires ZEVs account for 20 per cent of new-vehicle sales in 2026, 60 per cent in 2030 and 100 per cent in 2035. Quebec and British Columbia also have provincial mandates that require even more aggressive adoption of ZEVs.

But given the consumer behaviour in the first few weeks with reduced or no rebates , Hearn said the industry has no hope of hitting those targets without government incentives lowering the upfront cost of ZEVs.