You may have heard about a recent U.S. report suggesting that electric vehicle sales were in fact lagging — that once-waitlisted cars were suddenly sitting on dealership lots while their gas-powered forbearers passed them by.
And while this report has been widely circulated and referenced in the news, including here in Canada, there’s a serious problem with the conclusion many are drawing .
Far from being unpopular, EVs continue to surge in sales, and yes, you’ll still struggle to find one in Canada.
The most recent study on Canadian EV inventory, released earlier this year with data from 2022, found that, while sales for electric vehicles were increasing across the country, inventory at dealerships was at an all-time low. Just ask any Canadian who’s been on the market for an EV lately.
But the American study does impart some important lessons: namely, that EVs have upended the traditional dealership model that has dominated car sales for decades. And that the U.S.’s EV rebate is less effective than Canada’s.
First of all — and this is key — made-to-order cars such as Tesla and Rivian were excluded from that study’s calculation, as they don’t sit on dealership lots. This is no small omission. Tesla alone accounted for 65 per cent of all U.S. EV sales in 2022. So, at least two-thirds of all electric vehicle sales in America were omitted from the analysis. When you look at actual sales rather than inventory (a better measure of true demand), American EV sales are at an all-time high, up 50 per cent year on year in the second quarter of 2023.
What’s more, America’s EV tax credit is fundamentally protectionist, designed not just to incentivize buyers but to spur an American EV industry by requiring that final assembly of eligible cars happens in the U.S. The logic is simple enough: you want to sell more EVs in America? Build them here.
Unfortunately, this excludes many popular EV models.
The Hyundai Kona Electric and the Ioniq 5, Canada’s third and fourth bestselling EVs in 2022 are both excluded. The once pioneering Nissan Leaf is ineligible. Even the Ford Mach-E, despite its American maker, only qualifies for 50 per cent of the EV tax credit.
An American-built Tesla, on the other hand, is eligible for the full $7,500 U.S. rebate, and so one could expect U.S. buyers to gravitate toward the disruptive carmaker over brands for which no rebate is offered. And that’s exactly what is happening. Tesla’s global sales went up 37 per cent in the first quarter of 2023 (with the popular Model Y increasing by 79 per cent). In the second quarter, the automaker’s sales shot up another 10 per cent — the same quarter covered by the study above, which, again, excludes Tesla.
While America’s bigger tax credit has been great news for Elon Musk, the U.S. study suggests that, if anything, it’s so far been less effective than Canada’s simpler, less conditional $5,000 rebate. And yet Canada’s auto lobby has been asking the federal government to go higher to keep up with the U.S. The reality is quite the opposite: we’re now seeing that America’s policy isn’t keeping up with Canada’s.
A fair but open rebate is the better measure. It’s more effective at achieving its goal of getting more EVs on the road at a lower cost, and it’s better for buyers as it increases choice and thus competition. And competition, as we’ve seen with Tesla’s and Ford’s recent price cuts, is what truly drives down costs for consumers.
That’s why Canada’s forthcoming EV sales regulation — another bugbear of the auto industry — is similarly good policy. A recent analysis by Environmental Defence found that the measure, which requires automakers to sell a growing share of electric vehicles, would cut EV prices by 20 per cent as automakers are forced to sell more affordable models to meet the requirements.
For years, B.C. and Quebec have offered drivers demand-incentivizing EV rebates while boosting supply with their own EV sales regulations. Both provinces continue to lead the rest of Canada in electric car sales by a considerable margin.
We needn’t look south of the border for answers when we’re already doing things better up here.
This post was coauthored by Trevor Melanson and originally appeared in the Star.