Are EV Mandates and Market Reality on a Collision Course?

This report examines the mandates of the British Columbia and Canadian federal governments aimed at accelerating electric vehicle (EV) adoption through stringent zero-emission vehicle sales targets. It assesses the intended environmental benefits of these mandates in the context of evolving market, economic, and technological realities.

The analysis reveals that while EVs offer higher energy efficiency and reduced maintenance costs compared to internal combustion engines, consumer demand remains extremely sensitive to price and purchase incentive levels. Reductions or eliminations of purchase incentives in Canada at the federal level and in provinces like Quebec, Ontario, and British Columbia, as well as internationally, have led to steep declines in EV sales, underscoring a heavy reliance on government support. For example, statistics reveal EV sales in British Columbia dropping to 18% of new vehicle sales in February 2025 from 22.5% in the 4th quarter of 2024 and 24.9% in the 3rd quarter.

Economic pressures and policy uncertainties, notably shifts in US environmental and recent tariff policies, have further complicated the feasibility of rigid EV mandates. Automakers face significant compliance challenges, including steep penalties or paying their competitors like Tesla for compliance credits, constrained profit margins, and difficult trade-offs between EV and higher-margin conventional vehicles, that risk distorting market behaviour and destabilizing the automotive sector.

Additional challenges include inadequate charging infrastructure, particularly in rural areas, performance issues in cold-weather regions, and supply chain vulnerabilities that have already prompted several high-profile project cancellations. These factors contribute to heightened investment risks and potential market distortions, such as excess inventory and reduced conventional vehicle availability.

Equity concerns are also prominent. The high upfront cost of EVs, coupled with disparities in charging accessibility, disproportionately impacts lower-income households and renters, exacerbating social inequities in the transition to electric mobility.

In response, the report recommends replacing inflexible sales mandates with a more adaptable, goals-based regulatory framework. Such an approach would set progressive emissions targets while allowing manufacturers the flexibility to innovate and optimize their vehicle mix, thereby balancing environmental objectives with economic realities and ensuring a more equitable transition.

Jerome Gessaroli is a senior fellow with the Macdonald Laurier Institute. He writes on economic and environmental matters, from a market-based principles perspective. Jerome teaches full-time at the British Columbia Institute of Technology’s School of Business, courses in corporate finance, security analysis, and advanced finance. He was also a visiting lecturer at Simon Fraser University’s Beedie School of Business, teaching their undergraduate and executive MBA programs.

Jerome is the lead Canadian co-author of 4 editions of the finance textbook, Financial Management Theory and Practice. He holds a BA in Political Science and an MBA from the Sauder School of Business, both from the University of British Columbia. Prior to teaching, he worked in the securities industry. Jerome also has international business experience, having worked for one of Canada’s largest industrial R&D companies developing overseas business opportunities in China, Hong Kong, Singapore, and India.