New Phase for Canada’s EV Market: Incentives Return and Policy Shifts

Key Takeaways:

• On 5^th February, 2026, the Canadian Government announced it is shifting away from EV Availability Standard (EVAS) toward a more flexible emissions‑based regulatory approach.
• The new $2.3 billion EV Affordability Program (EVAP) was announced, effectively replacing a stick with a carrot to stimulate consumer demand.
• The strategy links EV adoption with industrial funding, tax relief, and charging infrastructure investment in an effort to strengthen domestic auto manufacturing.
• The change comes weeks after the announcement of a strategic EV partnership with China that will allow 49,000 Chinese EVs to enter Canada at a 6.1% most favored nation tariff rate, with the import limit increasing to 70,000 vehicles over five years.
• cCarbon estimates that 16% of total LDV sales in Canada will be ZEVs by Q4 2026, and 25% by 2030.

On 5 February 2026, Prime Minister Mark Carney announced a revised auto and EV industrial strategy aimed at strengthening domestic manufacturing, reducing trade vulnerabilities, and accelerating electric vehicle adoption. The government framed the initiative as part of a broader industrial reset focused on economic resilience, competitiveness, and clean growth. Following are the key announcements:

• The federal government will provide $3 billion from the Strategic Response Fund and up to $100 million from the Regional Tariff Response Initiative to support innovation in its domestic auto industry. This funding is intended to help auto manufacturers adapt to changing market conditions, expand domestic capacity, and diversify export markets.
• New tax measures including a productivity super deduction and reduced corporate tax rates for companies producing zero emission technologies and electric vehicles.‑deduction‑emission technologies and electric vehicles, aimed at attracting investment and supporting domestic clean manufacturing.
• The earlier EV Availability Standard (EVAS) will be replaced with stronger greenhouse gas emissions standards, aiming to double the stringency of existing emissions by 2035 and set an ‘aspirational’ goal of 75% EV sales by 2035 and 90% by 2040.
• A new $2.3 billion, five year EV Affordability Program (EVAP) to shore up consumer incentives. Under EVAP buyers and businesses can receive up to $5,000 for battery electric vehicles (BEVs) and fuel cell EVs and Up to $2,500 for plugin hybrid vehicles (PHEVs). Total incentive amounts decrease over the remainder of the decade, as shown in the table below. ‑year EV Affordability Program‑cell EVs; ‑in hybrid vehicles (PHEVs).
• Imported vehicles are subject to a $50,000 price cap, while Canadian made EVs and PHEVs are exempt from this limit. Buyers could start benefiting from this new program as of February 16, 2026. Canadian made EVs and PHEVs are exempt made EVs and PHEVs are exempt
• The government will invest $1.5 billion through the Canada Infrastructure Bank to expand EV charging networks and hydrogen refueling infrastructure nationwide.
  
  

  Source: Government of Canada

The new vehicle purchase program replaces Canada’s iZEV program, which provided up to $5,000 in purchase or lease incentives but was halted around a year ago after its funding was exhausted. The suspension of the iZEV program in combination with the 2024 100% tariff on Chinese imports has had a notable impact on ZEV uptake over the past year and a half. EV market share dropped sharply from 18% in Q4 2024 to 9% in Q1 2025, remaining at that level throughout the rest of the year.

Source: Static Canada

This decline led Canada to miss the sales mandates set under the Electric Vehicle (EV) Availability Standard (EVAS), which aimed for 20% ZEV sales by 2026, 60% by 2030, and 100% by 2035. This shift underscores how heavily EV demand in Canada relies on consumer incentives, especially in a high-cost environment with tariff restrictions.

cCarbon Model Outlook: ZEV Sales and Stock projection-2030

With the EV Affordability Program (EVAP) benefits commencing as of February 16, 2026 and the stated goal of 75% EV sales by 2035 and 90% EV sales by 2040, EV adoption is expected to grow. By Q4 2026, we expect the incentive to push EVs to reach 16% of total LDV sales nationwide. However, due to the $50,000 cap on imported cars and differing incentives for BEVs and PHEVs, EV sales will not surpass the highest levels seen before the iZEV program

Affordable Chinese EV penetration, supported by lower import tariffs, along with investments in charging infrastructure, incentives for domestic manufacturing and EVAP, will drive ZEV sales over the rest of the decade. Based on these factors, cCarbon projects total LDV sales to reach 25% by 2030 and continue to increase thereafter.

Our ZEV sales and stock projections are shown below:

Source: cCarbon Estimates (2026)

Based on cCarbon projections, 1.4 million ZEVs are expected to be added to the Canadian LDV stock by the end of 2030 which would result in ZEVs making up 9% of the total LDV stock by that year.

Conclusion

North American EV markets are highly sensitive to consumer incentives, and Canada is no different. The government’s policy reset, shifting from the binding sales targets in the EVAS to emissions-based standards, and restoring incentives through the EV Affordability Program (EVAP), signals a shift in how the Carney administration seeks to meet long-term climate goals.

With these changes, EV adoption is expected to start accelerating in Q2 2026, returning close to iZEV levels by Q4 2026. cCarbon projects 16% of total LDV sales will be ZEVs by Q4 2026, and 25% by 2030, adding 1.4 million ZEVs to Canada’s LDV stock by 2030, supporting the country’s climate objectives.