New Canada EV subsidies will support at least 500,000 new sales

With the abrupt end of Canada’s initial electric vehicle (EV) subsidy scheme, the iZEV program, in January 2025, as well as the deterioration of its trading relationship with the US throughout that year, EV sales in the country declined 38% compared to 2024. In the opening months of 2026, however, Canada has sought to reinvigorate its EV market.

First, it has struck an agreement with China to allow up to 49,000 Chinese-made EVs into the country at a tariff rate below 100% for the first time since 1 October 2024. More recently, it has launched its new EV subsidy scheme, the ‘Electric Vehicle Affordability Program’.

How much support is available?

The five-year scheme has a total budget of CAD2.275 billion (USD $1.67 billion) and supports the purchase or lease of new EVs. BEVs and FCEVs are eligible for up to CAD5,000 (USD $3,660) in support, while PHEVs can receive up to CAD2,500 (USD $1,830). Eligible vehicles must be made in either Canada or a country with which it has a free trade agreement. Imported EVs must have a final transaction price of CAD50,000 (USD $36,620) or below, while locally made EVs have no price threshold.

To receive the maximum level of financial support, the EV must be either purchased or leased over a four-year period. Vehicles leased over a one-, two- or three-year period receive a pro rata subsidy. Considering 2026 EV sales and the subsequent BEV market share of the theoretically eligible EVs, Benchmark analysis finds the subsidy scheme will support the sale of at least 515,000 EVs over its five-year duration, assuming all vehicles receive the maximum available subsidy.

Benchmark analysis suggests Canada’s BEV market share will grow over the subsidy’s duration, though Benchmark still expects the scheme to fund a minimum of 500,000 new EV purchases. The total number of new EVs supported by the scheme is likely to be higher, as not all vehicles will receive the maximum amount and the subsidy value will decline over the scheme’s duration.

How limiting are the scheme’s eligibility criteria?

Owing to the array of free trade agreements of which Canada is a part, the vehicle production location criteria is unrestrictive. Canada holds agreements with several key EV-producing nations and regions. These include the US, Mexico, the EU, Japan and South Korea.

The transaction price limit is more restrictive and constrains consumers to the base model of many of the eligible vehicles. For instance, the Chevrolet Equinox, Canada’s second best-selling BEV in Q1 2026, has a starting MSRP of CAD49,643 (USD $36,380), while Canada’s best-selling EV in Q1, the Toyota C-HR, has a starting transaction price of CAD48,015 (USD $35,180). However, this is not the case for all eligible models, with several current and upcoming models, such as the new Chevrolet Bolt and Fiat 500e, having starting prices further below the CAD50,000 (USD $36,620) upper limit.

In Q1 2026, 54% of EVs sold in Canada were eligible and could have theoretically qualified, providing they were sold below the scheme’s price limit. The scheme has the potential to cover a significant proportion of Canada’s new EV sales, despite the restrictive nature of the transaction price limit, providing the market with support following the turbulence it experienced in 2025.

This article draws on insights from Benchmark's EV & Battery Service. To find out more, fill in the form below and one of the team will be in touch: