EV prices need to drop by one third if Canada wants to hit sales targets, says gov’t report

Unless policies or technologies change, the ownership cost of electric vehicles (EVs) needs to decrease by 31 per cent if Canada wants to reach its sales target of 60 per cent EVs by 2030, according to a new report released Thursday by Parliamentary Budget Officer (PBO) Yves Giroux.

“In the absence of a government mandate and regulations forcing manufacturers to sell at least 60 per cent of zero-emission vehicles, that’s the price differential that one would need to meet these targets,” Giroux said in an interview with CTV News Channel on Thursday.

Last December, the federal government unveiled its Electric Vehicle Availability Standard that outlined zero-emission vehicle sales targets for automakers. The standard requires all new light-duty sales in Canada to be electric or plug-in hybrid by 2035. There are also interim targets of at least 20 per cent of all sales being EVs by 2026 and 60 per cent by 2030. Auto manufacturers who do not meet those targets would have to pay into charging infrastructure.

The most recent statistics show that electric vehicles accounted for nearly 11 per cent of new vehicle registrations in 2023, but there are concerns that driver demand is slowing down. Growth forecasts for auto companies have plateaued and concerns about charging infrastructure persist. The price of EVs has also pushed the cars out of reach for many consumers. According to the Canadian Black Book, the average cost of an EV was $73,000 in 2023.

But the PBO does acknowledge that consumers could save thousands of dollars in the long run by switching to an electric vehicle. According to the report, the ownership cost, which includes the price of a car and operating costs, of an EV over eight years would be $62,920 if the car was purchased in 2022, while the cost would be $71,680 for a gas-powered vehicle.

“It means that the relative price has to go down for EVs. It can be done by bringing the cost of electric vehicles down, but it could also be by increasing the cost of all the other alternatives, which is the gas- and diesel-powered cars and trucks,” Giroux said.

In 2019, the federal government started offering an incentive of up to $5,000 for eligible consumers to buy or lease specific makes and models of EVs. The program was set to expire in early 2025, but the Liberals’ budget this past spring extended the program with a $607-million top-up over two years.

Deputy Prime Minister Chrystia Freeland was asked on Thursday whether the federal government would extend the program further, but she wouldn’t say.

“When it comes to EVs, our government has made historic generational investments in the EV sector, and these are investments in great jobs for Canadian workers. They are also investments in climate action,” Freeland told reporters.

Some provinces offer their own EV incentives, but the PBO report indicates that many of those incentives will wind down by the end of 2026. British Columbia is limiting the vehicle models that will qualify for rebates, while Quebec is cutting rebates by 60 per cent next year and phasing it out completely by 2027.

“We simply can’t achieve the very aggressive sales targets the government has set if there are not strong purchase incentives available to Canadians,” Canadian Vehicle Manufacturers’ Association president Brian Kingston said in an interview with CTV News.

Without increasing consumer incentives or subsidies for manufacturers, Kingston says the federal government’s EV targets need to be reviewed.

“I think it’s time for the federal government to take a serious look at them,” Kingston said. “Look at the current EV market in Canada, we have seen a slowdown in sales this year, and make sure that these targets are actually adjusted to the real market conditions that Canadians are facing when they go to buy a vehicle.”

The PBO report also says continued subsidies or price adjustments by auto manufacturers could lead to price reductions for EVs.

The new PBO report also assessed public charging stations. While it said the federal government’s EV sales target would increase the supply of charging ports in Canada by nearly 39,000 units, it does fall short of demand.

“We estimate that by 2030 the market provision of public charging ports will be somewhat less than what is required according to a needs analysis commissioned by Natural Resources Canada,” the report states.

There are currently more than 25,000 public EV chargers in Canada, according to the federal government. But there is a massive gulf between what is available and what is needed. Kingston points out that the government’s own research shows 40,000 new ports need to be installed each year for the next decade and a half in order to meet the new targets.

If governments have to pull back on rebates, Kingston says they should help expand the number of public charging stations to spur both industry growth and consumer purchases.

“You can’t convince more people to drive an EV if you don’t have the infrastructure, and it’s hard to invest in infrastructure if you don’t have enough vehicles on the road to make it profitable. It is the perfect place for government to play a role,” Kingston said.