Canada’s electric vehicle (EV) industry must diversify beyond its historic reliance on the United States and build stronger domestic demand if the country wants to protect auto jobs and secure long-term competitiveness, according to a new analysis and commentary from the Pembina Institute, a leading clean energy think tank.
In a blog published February 4, Pembina argues that Canada’s automotive sector has long been structurally vulnerable because more than 80 per cent of vehicles made in the country are destined for the U.S. market, exposing Canadian workers and manufacturers to volatility in U.S. trade policy and demand.
“That dependency has resulted in significant job losses in the Canadian auto sector,” the Pembina report notes, citing production declines linked to U.S. reshoring efforts and tariff threats.
The Pembina Institute says the global shift to EVs represents a rare opportunity for Canada to rebalance this dynamic by connecting domestic workers and manufacturers to a rapidly growing global market while building stable demand at home. Current statistics suggest that while EV sales have grown internationally, adoption in Canada has been uneven, with registrations representing just a small share of the national fleet and showing signs of slowing after consumer rebate programs ended.
Industry data shows EV sales in Canada plunged sharply in early 2025 after the federal Incentives for Zero-Emission Vehicles (iZEV) program paused, with some markets seeing year-over-year drops as high as 40–45 per cent. That decline occurred even as the broader auto market grew, suggesting price and incentive factors remain key to consumer uptake.
A BloombergNEF outlook shows global EV sales continue to rise overall but that growth rates are decelerating in major markets, including North America, as policy uncertainty and infrastructure challenges weigh on demand.
Pembina’s analysis comes as Ottawa and industry stakeholders grapple with broader trade and policy pressures. Canada previously launched a 30-day public consultation on measures to protect auto workers and the EV supply chain from unfair Chinese trade practices, underscoring concerns about global oversupply and non-market competition that could undercut domestic manufacturing.
At the same time, recent moves by U.S. authorities, including threats of tariffs and shifting EV sales mandates, have intensified debate about Canada’s export dependency and competitiveness. A recent Wall Street Journal report highlights Canadian government efforts to recoup subsidies from automakers like Stellantis and General Motors after scaled-back production in the country.
Pembina says Canada must focus on two parallel goals: stimulating a robust domestic EV market and diversifying export markets. “If the U.S. market is becoming less reliable, Canada must concentrate on where global demand is expanding,” the think tank argues.
Part of that strategy includes strong policies like the Electric Vehicle Availability Standard (EVAS) and continued investment in charging infrastructure, incentives and consumer choice — measures that help make EVs more affordable and attractive to Canadian buyers.
Beyond vehicles themselves, the Pembina analysis highlights the importance of engaging across the entire EV supply chain, from vehicle assembly to battery production and critical mineral development, where Canada has natural advantages that could support high-quality jobs.
Provinces such as Québec have attracted major battery investments, including a planned $7-billion battery cell facility and battery material plants, reinforcing Canada’s potential role in EV production and the broader clean economy.
Experts say Canada’s path forward involves policy clarity and market support, balancing domestic demand with global competitiveness. As the EV sector evolves, maintaining momentum on electrification policies and workforce development will be central to ensuring Canadian auto workers benefit from the transition to a low-carbon future.
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