Here’s Why Canada’s Car Market Could Get Weirder Than You’ve Ever Imagined

Mazda has announced that all of its battery-electric vehicles launched in North America from 2025 on will adopt Tesla’s charging interface, officially dubbed the North American Charging Standard (NACS). This is a noteworthy announcement because Mazda doesn’t currently sell any BEVs in the U.S., but the brand does look past the northern border where things are different. The Mazda MX-30 that was discontinued in America is still alive in Canada, and it could be a sign of greater weirdness that may come in the Great White North’s car market.

See, Canada has enacted an EV mandate. On the face of it, that isn’t groundbreaking. After all, California has moved to ban the sale of new combustion-powered cars by 2035, so some EV mandates are coming to America. However, Canada’s EV mandate operates at a federal level, which is very different from the piecemeal state-by-state approach the California Air Resources Board is taking. By 2035, all new vehicles sold in Canada will have to be either 100 percent free of tailpipe emissions or be plug-in hybrids with an all-electric range of at least 80 km (50 miles). That’s an ambitious target for a country with the population of California. Oh, and this isn’t a simple deadline – it’s an escalating program, mandating a 20 percent zero emission vehicle sales mix in 2026 and growing from there. The penalties for not meeting this? Well, they have the same teeth that penalized Volkswagen for Dieselgate. Ouch.

Now, in the interim, there is some flexibility as to how manufacturers meet these escalating EV targets. For 2024 and 2025, manufacturers can bank credits in advance to make model years 2026 and 2027 less painful. Likewise, manufacturers can earn one credit for every $20,000 spent on 150 kW or greater DC fast charging infrastructure that “must be opened between January 1, 2024, and December 31, 2027.” Those credits go away after 2030, but they may provide short-term easing. In addition, before 2035, credits can be traded between manufacturers, so a company with many combustion-powered cars like Toyota can buy credits from a company that sells a lot of EVs, like Tesla. However, credits banked can only be spent or traded within five years of earning them, and this banked credit system will go away in 2035.

While there’s still plenty of machinations to play out regarding how manufacturers respond to this mandate, there are a few things to look out for. Firstly, compliance EVs are possible in the short term, partly due to bank credits and partly as a result of provincial mandates in British Columbia and Quebec. We’re already seeing the Mazda MX-30 being kept on sale, but the list of automakers without advanced EV plans in North America is short enough that widespread compliance car sales shouldn’t be a set expectation.

A more realistic outcome? A whole bunch of VINs that start with L  – as in, cars from China. See, China is currently crushing it when it comes to EV pricing, and Canada’s federal EV rebate is agnostic of vehicle origin, so it isn’t surprising that Canadians can already buy Chinese-made EVs. Last year, Tesla started selling Shanghai-built Model 3 and Model Y EVs in Canada, since it was attractive from a business perspective to do so. Don’t be surprised if more manufacturers start doing the same. At Kia’s 2023 EV day, it confirmed the compact EV5 electric crossover would come to North America, but Autoblog reports it won’t be sold in the United States. It’s not terribly hard to read between the lines here.

Don’t look for Chinese brands to arrive on the Canadian scene immediately – but don’t be surprised if they eventually start popping up. Brands like BYD and MG are already making inroads in Mexico, so Canada may be a logical expansion. It’s also possible that Chinese OEMs will set up Mexican manufacturing bases to get in on America’s sweet, sweet tax rebates, so expect Chinese EV brands to eventually make inroads in the USA. After all, Canada and the U.S. have similar vehicle standards, and it doesn’t make a ton of sense to homologate a vehicle purely for a California-sized market when all of the United States can be reached.

Alright, so more Chinese-built EVs are likely for Canada. What else? Well, here’s something weird: The Canadian ZEV mandate runs on model years rather than actual calendar years. Objectively, one of the funniest possibilities is the potential for an extra-long 2025 model year to cushion the blow of the mandate’s introduction, or an extra-long 2034 model year on some specialty vehicles like high-end combustion-powered sports cars. A less probable but equally funny outcome would be a massive oh shit moment of EV affordability leading to Canada adopting ECE vehicle standards, opening the floodgates for European imports. Canada already permits the use of UN ECE-spec headlights at a federal level, as per CMVSS 108, along with several other ECE vehicle standards, so total harmonization isn’t out of the question, even if chances are slim.

A more likely outcome? The used car market could get very weird indeed. It’s not uncommon to see recent Canadian-market vehicles for sale in America, and that’s because the Canadian Motor Vehicle Safety Standards and the U.S.’s Federal Motor Vehicle Safety Standards are so alike. To import a vehicle from Canada to America, you typically have to clear two hurdles. One is emissions compliance. According to the EPA:

A Canadian vehicle is identical to a United States certified version if one of the following is true:

• The Canadian vehicle has an emission label stating it is certified to United States EPA federal emission standards.

• The vehicle manufacturer’s United States representative has provided a letter of compliance that states the vehicle complies with all United States EPA regulations. Generally, EPA only accepts compliance information from the manufacturer’s United States or Canadian representative.

My BMW 325i has a sticker of EPA compliance on it, as does my Porsche Boxster, as did my Infiniti G35, as does my parents’ Hyundai Sonata. It’s just a standard thing to see in most Canadian vehicles, so it’s not surprising that this is generally the easier bit.

The second obstacle is clearance with the National Highway Traffic Safety Administration. Of course, since many Canadian vehicles are built to conform with U.S. standards, this process is relatively easy. Per NHTSA:

To be imported free of restriction, a motor vehicle less than 25 years old must be originally manufactured to comply with all applicable Federal motor vehicle safety standards (FMVSS) and bear a label certifying such compliance that is permanently affixed by the vehicle’s original manufacturer. A motor vehicle that bears a label certifying compliance with all applicable Canadian motor vehicle safety standards (CMVSS), but not with the FMVSS, can still be imported as a conforming motor vehicle under Box 2B on the HS-7 Declaration form to be presented to U.S. Customs and Border Protection (Customs) at the time of entry if the following requirements are met:
• The vehicle is being imported for personal use and not for resale;
• The vehicle is not a salvage vehicle, a repaired salvage vehicle, or a
reconstructed vehicle;
• The importer obtains a letter from the vehicle’s original manufacturer, on the
manufacturer’s letterhead (and not that of a franchised dealer), identifying the vehicle by
vehicle identification number (VIN) and stating that the vehicle conforms to all
applicable FMVSS except for the labeling requirements of Standards Nos. 101 Controls
and Displays and 110 Tire Selection and Rims or 120 Tire Selection and Rims for Motor
Vehicles other than Passenger Cars, and/or the specifications of Standard No. 108
Lamps, Reflective Devices, and Associated Equipment, relating to daytime running
lamps.

Unsurprisingly, this system works both ways, with most U.S.-market vehicles made within the past 15 years being eligible for Canadian import through the Registrar of Imported Vehicles, so long as requirements like metric gauge cluster labeling, French safety labels, and daytime running lights are met. In the age of widespread digital instrument clusters that flip from imperial to metric and LED daytime running lights as styling statements, the list of necessary modifications to most models is quite small, and used U.S.-market vehicles could be critical to meeting overall consumer demand.

Let’s take the 2030 mandate as an example, where 60 percent of each manufacturer’s mix must consist of EVs and plug-in hybrids. If a manufacturer only has enough combined credits and sales to mark the equivalent of 30,000 EVs in Canada, it will only be permitted to sell 20,000 combustion-powered cars, which could result in an exceptionally bad year for some brands. Obviously, people still need cars, and there’s currently nothing explicitly stating that used, imported combustion-powered vehicles from America can’t come into Canada in 2030. Don’t be surprised if, in a few years, your old daily driver ends up moving to Canada.

While the results of Canada’s federal EV mandate are yet to be seen, it promises to throw an interesting curveball into the carmaking mix. Realistically, it’s only permanent for as long as administration supports it, but automakers tend to plan for the long-term, so don’t be massively surprised if Canada’s car market looks slightly different from America’s through the next 11 years and beyond.

(Photo credits: Mazda, Tesla, Kia, Honda)

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