Sales of alternative fuel vehicles, including battery electric and hybrid vehicles, reached new highs in Canada and the United States in recent months, but impending incentive changes and a looming political shift could soon disrupt that trend.
New registrations of battery electric (BEV), hybrid electric (HEV) and plug-in hybrid (PHEV) vehicles accounted for just over 25 per cent of new motor vehicle registrations in Canada in the third quarter of 2024, according to Statistics Canada data. In the U.S. combined sales reached 21.2 per cent.
“While the surging sales of HEVs is still the main plot point, BEVs have seen sales pick up over the past two months compared to a year ago,” BMO economist Erik Johnson wrote in a note about the U.S. sales.
The strong figures for both countries stand in contrast to some reports about dwindling interest in zero-emission vehicles. In the U.S., HEV purchases were up 41 per cent year-over-year in November, while BEV sales were up 15.2 per cent. In Canada, HEV sales rose almost 20 per cent year-over-year in the third quarter, and BEVs were up just over 28 per cent.
Johnson notes that U.S. president-elect Donald Trump has said he would eliminate some incentives for zero-emission vehicles, “so part of the acceleration in November could be driven by consumers pulling forward demand to take advantage of those tax credits in case they disappear shortly after Inauguration Day. December and January sales will help to reveal whether that is indeed the case.”
In an email to Yahoo Finance Canada, Johnson says incentives are likely also responsible for some of the sales strength in EVs and PHEVs. B.C.’s tightening of rebate eligibility rules “is clearly limiting sales growth,” he writes, while an imminent reduction of Quebec’s rebate could be pushing sales up as buyers rush to get the full amount.
Quebec’s considerable charging network and low electricity rates are other factors, Johnson says. In 2024, the province accounted for over half of the zero-emission vehicles (ZEVs, which include BEVs and PHEVs) sold in Canada.
“In 2025, you might see less of a slowdown in Quebec than we’ve seen in British Columbia,” Johnson added. “The rebate will still be $4,000 at the provincial level, which when stacked with the [federal government] credit will likely be large enough to bridge most of the capital cost difference between ZEVs [zero-emission vehicles] and comparable ICE [internal combustion engine] vehicles.”
Johnson says ZEV sales growth is likely to continue in 2025, in part because Hyundai-Kia has become the second-largest seller after Tesla. “Cadillac, Chevrolet, and Ford all are having strong years selling ZEVs as well,” he wrote, singling out Cadillac’s mid-sized Lyriq SUV. The incoming Trump administration, however, adds uncertainty.
