It’s now official. We have, as a nation, joined those other countries banning the sale of internal-combustion-engine-powered light-duty vehicles past the year 2035. Now, never mind that, like last year — when the feds dropped the original draft of these new standards — it appears the Liberals are once again hoping that dropping this rather Draconian new regulation right before Christmas will give them two weeks or so for skeptics’ distemper to dissipate. Or that, as I and many insiders believe, this is most definitely a Quebec-centric dictum — a province where both Liberals and EVs are hugely popular — writ large across the entirety of our fair land.
Discussion is over, the plans now firm, and the political party in charge, more desperate for wins that any time in their eight-year reign, are firmly committed to its implementation. In other words, automakers’ sales targets for battery-powered vehicles — some 20 per cent of all new cars sold in 2026, 60 per cent by 2030, and the full 100 per cent in 2035 — have been mandated, and now all that’s left to do is deal with the consequences.
Indeed, as a result of that finality, all I want to talk about today are consequences. Talk of how smart or misguided the rules are, or what the expertise of the people who crafted it might be, is now futile (until an election is called, of course). Better, then, to treat these new regs as the long-term dictums Prime Minister Trudeau and Minister of the Environment and Climate Change Steven Guilbeault intend them to be.
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For the time being, we need to forget about the whys and hows and think more about the whats. As in, what are all the possible outcomes for consumers — and our domestic automotive industry — going forward between today, December 19, 2023; and December 31, 2034, when the last ICE-powered vehicle will be allowed to be sold?
So, with apologies to Nostradamus — I will be the first to admit that my crystal ball is not nearly so, well, crystal-clear — I will posit all the possible consequences, intended and otherwise, that could result from what is now called the Electric Vehicle Availability Standard.
Well, it could work out
The Liberals may seem to be trying to channel It’s a Wonderful Life in their repeated decision to reveal pieces of their EV mandate during the Christmas rush, but we can’t — nor should we — dismiss the idea that the whole thing could actually have a rosy outcome. Odds long they may be, we can’t automatically discount the possibility that, 11 years hence, all Canadians will have been convinced they should buy a Zero-Emissions Vehicle (ZEV).
(It must also be noted that it’s now definite that, as long as they offer more than 80 kilometres of range, plug-in hybrids [PHEVs] will be allowed to make up 20 per cent of an automaker’s ZEV sales, too, even past 2035.)
That said, a lot of things have to go right for Canada to achieve 100-per-cent ZEV sales nationwide by 2035. For instance, Pierre Poilievre — or any reasonable facsimile the Conservatives might propose in the future — can’t get elected. Battery prices need to decrease, as has long been promised (but has recently stalled). Solid-state batteries need to deliver their promised range and charging-speed improvements. The roll-out of charging stations needs to be ramped up. The damned things also need to be made more f-ing reliable. Battery recycling must become a reality, rather than the virtue-signal it’s promising to be. “Higher-for-longer” interest rates have to recede. The prairies will have to get religion. Ontario will need to re-introduce its ZEV subsidies. The federal government will have to maintain its subsidies much longer than originally proposed. So as much as it is possible that we could indeed hit these new 2035 targets, failure of any of the above — but especially the maintenance of those consumer subsidies, both federal or provincial — could render these best of intentions wasted.
Especially since, like more than a few insiders, we’re starting to wonder if the rationale for the Electric Vehicle Availabiliy Standard is specifically Quebec-centric. EV proponents in La Belle Province — both government officials and advisory committees — have long complained that any slowing of EV sales can be chalked up to a question of poor supply, not weak demand. “Build more and they will come” has been the province’s constant refrain, alongside an undercurrent that legacy automakers were deliberately under-selling and under-producing battery-electrics on purpose.
That might well have been true, but you’d have to have been living under a rock for quite some time to not have noticed the huge amount of investment all automakers — legacy or otherwise — have put into building battery plants and EV assembly facilities. Certainly wait times for EVs have been dramatically reduced, and could well be eliminated by 2024. Yet, according to the CBC, the prime motivation for the government launching this Electric Vehicle Availability Standard — hell, it’s right there in the name — is that someone is going to steal away the EVs we Canadians so desperately want.
Unfortunately for that argument, the perceived perpetrator of this EV hoarding, the United States, has a huge glut of electric vehicles. As in, sales of EVs there have, if not tanked, at least slowed sufficiently that even some dramatic price cuts have failed to alleviate what has already turned into an over-production of battery-electrics.
Simply put, dealer inventories of BEVs stand at twice the level of ICEs in the States, and many promised assembly plants are being put on hold. If there really is a shortage of EVs in Canada, it can be handled readily by a re-allocation of the not-so-popular-as-proponents-keep-claiming product from south of the border. In other words, the Electric Vehicle Availability Standard — or, at the very least, its motivation — seems regionally-focused and out-of-date.
The Chinese are coming
The average price of an EV in Canada is CDN$73,000. EV proponents make all manner of excuses for this: the price of an ICE is also up; automakers are only choosing to make luxury battery-electrics; or, my favourite, look how cheap Tesla’s Model 3 is now! (Note to the Teslarati: it’s really quite easy to take all the profit margin out of your hottest car when rival automakers are dumping USD$1 billion or USD$2 billion of EV credits into your coffers every year). What none of those rationalizations change is that, for the 50 per cent of the Canadian population below the median household income — a little under CDN$70,000 after tax — buying a new electric vehicle is not even a pipe dream.
Nor, despite manifold promises of price reductions, does the cheap EV seem any closer to reality. Volkswagen’s promise of a 25,000-euro (about CDN$37,500) EV rings as hollow today as its denials of the allegations that became Dieselgate. Elon Musk has been threatening a USD$25,000 Tesla for so long now that even the Teslarati are getting skeptical, especially since the much-promised USD$40,000 Cybertruck is four years late and actually costs USD$60,000 (when the base model is finally introduced many months from now) and USD$120,00 in first-edition form.
Worse yet, the previously-ordained continued drop in battery prices has stalled. No surprise, really. One doesn’t have to be Milton Friedman to understand that a 10 to 20 times increase in demand in certain metals over the space of, say, 10 years does not normally engender a reduction in the cost of said metals, a problem proving especially acute for EV manufacturers, since more than 50 per cent of the cost of making a battery is in raw materials.
A lot of things have to go right for Canada to achieve 100-per-cent ZEV sales nationwide by 2035. Pierre Poilievre can’t get elected. Battery prices need to decrease. The roll-out of charging stations needs to be ramped up. The federal government will have to maintain its subsidies much longer than originally proposed. Failure of any of the above could render these best of intentions wasted.
Throw in the fact that it takes as much as five to 10 years for a mine to come on-stream in Canada, and the precipitous drop in pricing EV proponents have been promising seems remote indeed. Even the federal government now thinks that true price parity could take at least 10 years.
In fact, the idea that a fully functional EV — as in, one with sufficient range to serve as a middle-class family’s only mode of transportation — will be anywhere near CDN$30,000 without subsidies in the next five years seems laughable. A 32-kilowatt-hour little roustabout for the third car in a family might be feasible, but a 400-km-plus-(real-)highway-range four-door five-passenger EV for 30 large? With no government cash in the trunk? No one in North America — or Europe — can build that car.
But the Chinese can. In fact, they’re already doing it, and, thanks to a cost-of-manufacturing advantage that some corporate European CEOs put at as much as 15,000 euros, they are ravaging the E.U. market as we speak. Many other markets as well. In fact, one of the main reasons they aren’t in Canada is because America has a 25-per-cent-plus tariff on Chinese cars — not to mention their not being eligible for any of President Biden’s consumer subsidies — and we, being the pimple on the elephant’s butt, aren’t worth invading right yet.
But with the mandate’s rapid progression — that 60-per-cent-of-new-cars-be-EVs-by-2030 rule – it might become viable for BYD, NIO, and the like to establish a beachhead here, regardless of America’s recalcitrance. And when — okay, if — they come, there’s precious little chance our native auto industry can counterattack.
Do the people behind the Electric Vehicle Availability Standard — both its drafters and their advisors alike — understand this? It would certainly beggar the imagination if they haven’t had a momentary pause over these consequences. Indeed, I have talked with more than a few people behind the scenes about exactly this question and, while a few EV proponents are aghast at the prospect of a wave of cheap Chinese EVs coming to Canada, others see it as a small penalty to pay to get more electric vehicles on the road quickly.
And for those thinking these pleas that “The Chinese are coming” are a bit too histrionic, know that Tesla is already exporting China-built Model Ys to Canada, because there’s more profit to be had; Nissan is going to start building some of its EVs in China for global export; and The Wall Street Journal recently reported the Biden administration is thinking of upping the tariffs on Chinese electric vehicles beyond the current 25 per cent. In other words, the threat is real, other countries have already been invaded, and our neighbour to the south — usually our protector in such matters — is only looking out for Number One.
Prepare for cross-border shopping
The elephant in the room, as I mentioned, is the United States of America. The long-term issue with our cross-border relationship is that it’s extremely doubtful, no matter who is president, that America will ever enact its own ZEV mandate. Oh, their emissions standards might force automakers to make some significant amount of EVs in the future, but the realpolitik that is American governance these days would seemingly preclude an actual mandate that all cars might be electric.
That becomes important as we approach, say, 2030. By then, 60 per cent of all cars an automaker sells throughout our entire country will have to be BEVs. That would mean that if you sell, say, 60,000 electrics nationwide, you’d be allowed to sell 40,000 non-ZEV ICEs. For many of the larger automakers in Canada, that would be a bad year. Perhaps even a very bad year.
If, for instance, you’re selling 200,000 units annually now, but in 2030, you can only convince 60,000 Canadians to buy your ZEVs, that limits you to sales of just 40,000 ICEs. And you’re unlikely to transgress, as the federal ZEV mandate falls under the jurisdiction of the Canadian Environmental Protection Act (CEPA) — the law that was used to come down so hard on Volkswagen and its dirty diesels — and carries a $6-million penalty for the first offense, and can see individual executives charged personally, as well. In other words, the government is quite confident there will be 100-per-cent compliance with the new rules.
The consequences are many. First, you could expect said legacy automaker to restrict sales of ICEs to the beginning of any reporting period: Why would any automaker sell a lot of cars at the beginning of the year that could come back to haunt them if they don’t move enough BEVs by year-end? For another, it will concentrate automakers’ efforts on big-ticket vehicles even more, which these days means truck and SUVs, vehicles that are, as we’re constantly being reminded, the most polluting.
More important is that our American cousins to the south — a highly-entrepreneurial bunch, we’ll all agree — could flood our market with new (actually slightly used) ICEs to make up for the shortfall. Back in 2009, when our dollar was at par — and, if distant memory isn’t really fantasy, actually worth more than the greenback — five per cent of the new cars sold in Canada came from south of the border. With even more money to be made and a captive audience facing a shortage of cars they’re no longer allowed to buy through Canadian dealers, it could be many more.
Oh, the political games we play
Despite the amounts of money being bandied about, I fear the political ramifications even more. Currently, the penetration of ZEVs into the total market stands at an impressive 20-plus-per-cent in British Columbia, and almost as much in Quebec. Other provinces — with a less compliant consumer and/or no provincial incentives for EV purchase — are selling far fewer. Indeed, penetration in the prairie provinces stands at below five per cent, there being such a lack of enthusiasm for BEVs in some areas that even the most optimistic of EV influencers don’t see much chance of compliance to the 2035 standards.
So the question then becomes “What if Quebec and British Columbia and, indeed, most of the other provinces hit the 100-per-cent ZEV target on time, but Alberta, Saskatchewan, or Manitoba – or even all three — only get to, say, 50 per cent?” Would a federal government really alienate 50 per cent of what are, after all, eligible voters in their quest for full adherence to the rules?
You don’t need even the slightest hint of cynicism to posit that any Trudeau-led Liberal Party of the future — yes, God help us all — or any likely facsimile would have no problem putting the boots to the western provinces. A Conservative government, on the other hand, would have probably already long discarded any such EV mandate. In other words, what has always been tabled as a scientific discussion — the relationship between automotive greenhouse-gas emissions and climate change — becomes just yet another political calculation.
Of course, if you’re a fellow cynic, you know it’s been political all along.