The end of Quebec's electric vehicle rebate is likely to slow sales: auto dealers

Automobile dealers and manufacturers say Quebec's decision to end a rebate for electric vehicle purchases will stop people in the province from buying cleaner cars.

Ian Sam Yue Chi, the president and CEO of the Corporation des concessionnaires d'automobiles, the province's auto dealers association, said that without the rebate, currently worth up to $7,000, some consumers won't be able to afford zero-emission electric vehicles.

“It will slow adoption, so we might not meet the targets that had been set by the government. As well, we’re worried about the issue of vehicle affordability, removing these incentives will ultimately make buying vehicles more expensive for Quebecers,” Sam Yue Chi said in an interview Wednesday. “It’s bad news.”

In his budget tabled Tuesday, Quebec Finance Minister Eric Girard said the government will phase out subsidies for electric vehicles and plug-in hybrids beginning next year, before ending them completely in 2027.

Girard told reporters the cost of the program — around $400 million between April 2023 and January 2024 — is too high for the reduction in greenhouse gas emissions it achieves.

In the budget, the province says that since one in five new vehicles sold in Quebec is electric, the rebate is no longer necessary to encourage purchases.

But Sam Yue Chi said it's too early to end the successful program, adding that when a similar program in Ontario was cut in 2018, sales of electric vehicles quickly dropped.

Quebec currently offers rebates of up to $7,000 for the purchase of a new, fully electric vehicle and up to $5,000 for the purchase of a plug-in hybrid. Used electric vehicles are eligible for a rebate of up to $3,500.

At the beginning of next year, those subsidies will drop to $2,000, for hybrids and used electric vehicles, or $4,000 for new electric cars, before being cut in half the following January and eliminated one year later.

The federal government also offers a rebate of up to $5,000 for the purchase of zero-emission vehicles that is scheduled to last until the end of March 2025, or when the funds dedicated to the program run out.

Brian Kingston, the president and chief executive officer of the Canadian Vehicle Manufacturers' Association, said Quebec has been a leader in electric vehicle adoption because the province has incentivized purchases and supported the building of a charging network.

"Those are the two barriers to adoption and that's why Quebec leads, but what we'll see if they pull this incentive too quickly is that demand won't hold up, because the price gap continues to exist between the vehicle technologies," he said in an interview Wednesday.

Quebec requires a certain percentage of vehicles shipped to the province by automotive makers to be zero emission vehicles through a system that gives manufacturers tradable "credits" for selling electric vehicles and deducts credits on sales of gas-powered cars.

Kingston said that mandate was recently tightened, and that by 2030, the government will require 85 per cent of automobiles sold in the province to be zero emissions vehicles.

"If EV demand does not continue to grow at the prescribed rates that Quebec has put in the regulations, then the only alternative is for internal combustion vehicle inventory to be pulled from Quebec market," he said. "That is bad for dealers, that is bad for Quebecers, that is bad for auto manufacturers."

Quebec Environment Minister Benoit Charette told reporters Wednesday that he expects manufacturers will cut electric vehicle prices. But Kingston said that while prices will come down over time, it won't be quick because automakers are making major investments in a North American battery supply chain.

The Quebec government wants the province to be a major part of that supply chain. It has offered billions of dollars in subsidies to attract companies such as Swedish battery maker Northvolt to set up shop in the province and has supported the creation of plants making battery components, touting the province's cheap electricity and lithium supplies.

Marc-André Viau, the director of government relations at environmental group Équiterre, said that his organization supported the creation of rebates to get the electric vehicle market started, but they can't continue indefinitely because of the high cost.

Viau said his group has suggested creating a system where people who buy gas-powered cars pay into a fund used to subsidize the purchase of electric vehicles. Electric cars are a tool to reduce greenhouse gas emissions, he said, but replacing trips that would have been taken by car with public transit or active forms of transportation is better.

He agreed that the rebates were not delivering bang for the buck in greenhouse gas emission reductions but said Quebec isn't adequately funding initiatives like transit that would be more cost effective.

"It's like they've realized something, but they're not funding the corresponding solution," he said.

This report by The Canadian Press was first published March 13, 2024.

— With files from Patrice Bergeron in Quebec.