The transformation of the transportation industry reached a new milestone last year.
Zero-emission vehicles for the first time hit a double-digit market share in 2023, according to new data on Tuesday from Statistics Canada. EVs, which include battery electric and plug-in hybrids, accounted for 10.8 per cent of all new motor vehicle registrations last year.
It’s a big number – prepandemic, in 2019, EVs market share was 2.9 per cent – but 10.8 per cent in 2023 is also a small number, still only a fraction of the total market.
Governments have pinned a lot of climate policy hope on EVs. Transportation in countries such as the United States is the largest source of greenhouse gases. In Canada, emissions from passenger cars and trucks are almost as high as all the industrial operations in the oil sands. It’s the reason why countries including Canada are aiming for EVs to account for all new vehicle sales by the mid-2030s.
One in 10 last year is significant news – as sales of EVs rose almost 50 per cent in 2023 – but there’s a long way to go, in a short amount of time.
In December, Ottawa issued targets for new vehicle sales through to the 100-per-cent goal for 2035. The initial mark of 20 per cent in 2026 is within reach. British Columbia topped that level in 2023 and Quebec is close. Consultancy S&P Global Mobility forecasts Canada-wide EV sales to reach 25 per cent by 2025, higher and earlier than the federal government’s target.
The bigger challenge comes thereafter, in the decade leading to 2035. The finish line is the same – EVs take over driving – but the actual pace of gains may fluctuate.
In the U.S., President Joe Biden appears ready to moderate ambitions. A year ago, the Biden administration proposed tailpipe pollution rules to push EV sales to 60 per cent of the market in 2030 and 67 per cent in 2032.
Recent reports suggest the final rule, set to be released this spring, will reduce the 2030 target, as Mr. Biden sought a compromise with automakers and, especially, unions in an election year. The goal for 2032 would remain as planned, requiring steeper gains after 2030.
Canada’s numbers may have to be revisited. The domestic 2030 target is 60 per cent and 83 per cent for 2032.
Because of the integrated continental car market, in place for decades, Canada has taken its cues from the U.S. on key transportation policies such as vehicle fuel efficiency. The U.S. first instituted standards in 1975. In the early 2010s, president Barack Obama put in plans to double fuel efficiency. Donald Trump mostly scrapped those rules and Mr. Biden reversed course, pushing beyond the Obama targets.
In the Trump years, there was a possible fracturing of the continental car market, with Canada joining states such as California for stronger rather than weaker regulations. The same break is possible if Mr. Trump were to win in November. If Mr. Biden is re-elected, his targets will almost certainly shape what unfolds in Canada.
As EVs shift from novelty toward the mainstream, challenges of cost and charging infrastructure should recede. Prices for EVs should moderate, like other new technologies in the past, and once they’re on par with fossil fuel vehicles, the shift to EVs will accelerate, occurring alongside more widely available charging.
Governments will need to rethink EV subsidies. They’ve been important to help propel the market in its early stages but they generally benefit higher-income Canadians, the people with the money to buy an often expensive EV. Subsidies will need to soon be recalibrated, and targeted to those with lower incomes.
One evolving factor is competition from cheaper Chinese imports. China’s BYD is the company everyone is watching, rapidly expanding and now the world’s top seller of fully electric vehicles. BYD in 2023 quickly became the No. 2 EV seller in Australia. For buyers, lower prices are welcome. But Chinese competition could also rattle government investments in EVs in the U.S. and Canada. In February, Mr. Biden moved to deem EVs from China a security threat.
The big question of EVs has shifted from if to when. Globally, EVs are expected to eclipse a 20-per-cent market share this year, driven by China. The magazine Car and Driver in January said EV sales are “just getting started.” The EV sales milestone in Canada of 1-in-10 is significant. The next leg of the journey, the road to mass adoption, could be tougher.