Automotive News Canada - October 2024 - 49

* OCTOBER 2024
49
Canada's ZEV charge
has one powerhouse
But the 'crazy'
growth in Quebec is
expected to peter out
as vehicle incentives
are slowly dropped
By DAVID KENNEDY
TORONTO BUREAU CHIEF
SALES OF ZERO-EMISSION
vehicles in Quebec have boomed
in 2024, making the province the
runaway adoption leader by volume
and market share.
But the dominant run is
poised to get a reality check at
the start of 2025, auto experts
say, when what has long been
the country's most generous consumer
incentive is significantly
scaled back.
ZEVs made up 28.4 per cent
of new-vehicle registrations in
Quebec in the
second quarter,
up from
18.3 per cent
a year earlier,
according
to data from
S&P Global
Mobility.
ZEV REGISTRATIONS, QUARTERLY
70,000
60,000
50,000
40,000
30,000
20,000
70,000
60,000
50,000
40,000
30,000
20,000
10,000
2018
The province
also
accounted
for just over
half of all
ZEV volume
in Canada
from April to
June, the latest
quarter for
which data is
10,000
2018
2019
2019
2020
ZEV REGISTRATIONS, QUARTERLY
2020
30
25
20
15
10
5
2021
BEVs PHEVs
British
Columbia
Quebec
2021
BEVs PHEVs
2022
2023
2024
New ZEV
registrations
As a percentage of total new
registrations for the jurisdiction
vides " ample time for the consumer
within the province to
pick up those vehicles at that
incentive-pricing point, " Hearn
said.
STEALING FUTURE SALES
Automakers are seeing this
scenario play out on the front
lines.
Buyers taking advantage of
the larger incentive before it's
gone have " pulled some sales
ahead, " said Steve Flamand,
executive director of national
sales and digital strategy for
Hyundai Canada.
Following a fall sales surge,
Flamand and Hearn forecast that
the policy change will lead to a
slowdown in ZEV uptake beginning
in the first quarter of 2025.
Hearn expects the adoption
curve to flatten out over the longer
term.
" We'll see some growth continue, "
he said, " but
we won't see as
much as we're currently
seeing. "
British Columbia
has already experienced
a similar
trend, Hearn said.
In late 2022, the
tied its $4,000 incenB.C.
government
Canada
ly restricted the
tive to consumer
2022
2022
Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2
2023
2022
2023
2023
available. That's up from 40.5 per
cent in the same three months
of 2023. This is despite Quebec's
accounting for only about a
quarter of total Canadian vehicle
registrations.
And federal data suggests
that Quebec only tightened its
grip on the country's ZEV market
through the summer, with
60.2 per cent of claims under
Ottawa's ZEV incentive program
originating in the province in
August, according to data from
Transport Canada. That's up
from 56.3 per cent in July and
46.6 per cent in 2023.
GROWING, GROWING ... GONE
The ZEV numbers coming out
of Quebec this year are " crazy, "
but the rapid growth is unlikely
to last, said James Hearn, associate
director and product manager
of Canada industry performance
at S&P Global Mobility.
Hearn pointed to provincial
policy changes as the likely factor
behind an impending drop.
In April, the Quebec government
said it would phase out its
ZEV incentive, which offers consumers
up to $7,000 off the purchase
of a battery-electric vehicle.
The value of the rebate will
fall to $4,000 to start 2025 and
$2,000 to start 2026 before being
eliminated in 2027.
For plug-in hybrids, Quebec
offers up to $5,000 off. The incentive
will be reduced to $2,000 in
2025, $1,000 in 2026 and zero in
2027.
The eight-month window
between April and January pro2024
2024
2024
Source:
S&P Global Mobility
rebate.
The province's
ZEV adoption rate
peaked at 26.5 per cent in the
third quarter of 2023, but it has
fallen each quarter since. In the
second quarter, it was 21.8 per
cent, according to S&P data.
Quebec's decision to phase out
its incentive is a " big deal, " said
Hyundai's Flamand, because
the cost of electrifying vehicles
remains high globally, putting
price parity with internal-combustion-engine
vehicles out of
reach for the time being.
It also " creates instability " in
sales forecasts, he said, pulling
sales forward as buyers prep for
the next rebate reduction.
" It's a very unnatural seasonality
driven by this, " Flamand
said.
Hyundai, which is second
only to Tesla in ZEV sales in
Quebec this year, is displeased
with the policy change, Flamand
said, but all automakers face the
same outlook, so Hyundai is prepared
to keep up ZEV growth in
the province.
Quebec consumers are also
against the phaseout of the
rebate, according to a recent
poll conducted by Leger
on behalf of the Canadian
Automobile Dealers Association,
the Canadian Vehicle
Manufacturers' Association,
which lobbies for the Detroit
Three in Canada, and the Global
Automakers of Canada, which
represents import brands.
Of more than 1,000 Quebecers
polled this summer, 59 per cent
opposed eliminating the incentive,
while 24 per cent supported
the policy shift. -ANC
rebate.
this spring it greatincome
levels and
that qualify for the
type of vehicles
Federal surtax has the desired effect:
Production of EVs is leaving China
CONTINUED FROM PAGE 1
the Model 3 and Model Y, built
at its sprawling Shanghai plant,
to Canada for about 18 months.
Neither vehicle qualified for
federal rebates as of Oct. 1, and
Tesla will face punishing tariffs
on its imports if it does not
change tack.
The company does not break
out sales data by country or trim,
but according to federal records
obtained by Automotive News
Canada through an access-to-information
request, Tesla imported
more than 30,000 Model 3s and
Model Ys built in China in 2023
that qualified for iZEV incentives.
Other Model 3 and Model
Y variants imported to Canada,
typically costlier ones, are built
at Tesla's plants in California
and Texas.
The automaker did not
respond to a request for comment
about its response to the
tariffs.
Fiorani:
Canada's
new tariff will
likely lead
Tesla to shift
China-made
vehicles
bound for
Canada to
the United
States.
FILE PHOTO
But the surtax coming into
effect will likely
see Tesla shift
production
intended for
Canada back
to the United
States, said
Sam Fiorani,
vice-president
of global
vehicle forecasting
at
AutoForecast
Solutions in
Pennsylvania.
While
importing to
Canada, Tesla
has been taking
advantage
of its Shanghai
plant's excess
capacity, lower relative costs
and ready access to lithium
iron phosphate (LFP) batteries,
Fiorani wrote in an email
to Automotive News Canada.
Shifting to assembly sites in
California and Texas will hurt
the company's profitability on
the low-cost variants, he said,
but the alternative is to drop
them from the market.
" U.S.-made Tesla models with
LFP batteries will likely find
their way into Canada to replace
the Shanghai-made models, "
Fiorani said.
VOLVO ANTICIPATED TARIFF
Volvo Car Canada imports the
new EX30 crossover, XC60 plugin
crossover and " a very limited
number " of S90 sedans from
China.
The company, controlled by
China automaker Geely, has
built up inventory for all three
vehicles for the rest of 2024 ahead
of the tariff implementation date,
Volvo Car Canada spokesperson
Jennifer Okoeguale said. She
declined to disclose the number
of vehicles imported but said
they have arrived in Canada,
and some have already been
transferred to dealers.
The importation of the vehicles
ahead of Oct. 1 will allow
the vehicles to bypass the tariffs
that are applied by the Canada
Border Services Agency upon
The Polestar 2, the only
vehicle the automaker sold
in Canada in the first half of
this year, will no longer be
its priority in North America.
PHOTO: POLESTAR
Volvo will move production of the EX30 crossover to Belgium
next year, while the XC60 will shift to Sweden. Both are built
in China. PHOTO: VOLVO
Automotive News Research &
Data Center.
" We are currently evaluating
the announcement of tariff
increases from the Trudeau
administration, " Ofiara wrote
in an email. " As a global company
... operating across 27 markets,
we believe that free trade is
essential to speed up the transition
to more sustainable mobility
through increased EV adoption. "
The all-electric brand, based
in Sweden but ultimately owned
by Geely, began production of
its Polestar 3 crossover in South
Carolina in August. It plans to
assemble the new Polestar 4s
destined for North America in
South Korea starting in mid-2025,
Ofiara said.
The Lincoln Nautilus hybrid,
which is built in China, is
subject to the new federal
tariff. Ford Canada did not
respond to multiple requests
for comment.
PHOTO: FORD CANADA
arrival, according to Finance
Canada. The vehicles will also
be eligible for federal incentives,
as will other China-made vehicles
that arrived in Canada or
were " in transit " before
the start of October,
according to Transport
Canada.
For 2025, Volvo plans
to shift production of
the EX30 and XC60 to
other global plants,
partly in response to
Ottawa's crackdown
on China-made vehicles.
Volvo Canada will
begin sourcing the XC60
from Sweden in the first
quarter, Okoeguale said,
while production of the
EX30 will shift to Ghent,
Belgium, in the first half
of the year.
HYBRIDS ALSO FEEL IMPACT
Ford luxury brand Lincoln
could also be affected by the
import tariffs.
Production of the Lincoln
Nautilus, which was built in
Oakville, Ont., until December
2023, shifted to China for the 2024
model year. The crossover is
offered with a hybrid option for
2024 and 2025. The federal tariffs
cover hybrid vehicles " with both
spark-ignition internal-combustion
piston engine and electric
motor as motors for propulsion. "
Future
prospects for
the Polestar 2 in Canada
appear less certain.
Company spokesperson
Michael Ofiara said
a " select number " of Polestar 2
fastbacks will remain in stock,
but the Polestar 3 and 4 " will
be the priority in the North
American market. "
This marks a significant
change for the brand, which
sold more than 1,000 Polestar 2s
- and no other vehicles - in
Canada through the first half
of this year, according to the
Okoeguale:
Before
the tariff
increase for
China-built
vehicles went
into effect on
Oct. 1, Volvo
imported
enough
inventory for
the rest of
the year.
FILE PHOTO
Ford Canada did not
respond to multiple
requests for comment
about future imports of
the Nautilus hybrid.
Aside from the shortterm
ramifications for
the small number of automakers
importing EVs
and hybrids from China,
the tariffs that Ottawa
said are designed to
" protect Canada's workers
from China's unfair
trade policies " could keep
other automakers out
of Canada. At least one
China-based automaker
is already eyeing the
market.
In summer, federal
records showed that lobbyists
acting on behalf of BYD
Auto Co. registered with Ottawa
to " advise on matters related
to the expected market entry of
BYD into Canada for the sale of
passenger electric vehicles. "
BYD did not respond to a
request for comment about
whether it is reconsidering its
plans after the implementation
of the tariffs. - ANC
Vehicles
Vehicles
Percentage
Automotive News Canada - October 2024

Table of Contents for the Digital Edition of Automotive News Canada - October 2024
