Canada’s $100 billion electric vehicle plan faces serious setbacks as US tariffs and slowing North American EV sales cause manufacturers like Honda and GM to delay investments and scale back production, threatening the country’s position in the evolving EV market.
In early 2025, the Canadian federal government received warnings indicating that its big, ambitious plan to fork out $100 billion on electric vehicles (EVs) was facing some pretty real hurdles that could actually throw a wrench in its progress. Internal documents, which Canada’s National Observer managed to get their hands on, show that Philip Jennings, who’s the deputy minister at Innovation, Science and Economic Development Canada, flagged a “decline in expectations” among EV manufacturers. The main culprits? Slowing EV sales across North America and the chaos caused by U.S. tariffs that were slapped on under President Trump’s administration. This briefing, which was delivered to then-Minister François-Philippe Champagne back in January, really highlighted how these factors were leading to delays, changes, and even scaling back of planned investments across the EV sector.
The Canadian government’s vision was pretty comprehensive—aiming to build an entire EV industrial ecosystem. That includes everything from mining vital minerals to setting up new assembly lines, all with the hope of maintaining a competitive edge over the long haul rather than trying to get quick wins. Even with these setbacks, Champagne emphasized that this strategy is definitely a marathon, not a sprint—though, of course, he was later reassigned in a cabinet shuffle following the April federal elections. His replacement, Mélanie Joly, did say she was still engaging with the sector but didn’t give any concrete plans to tackle issues related to the tariffs, which seemed like quite a significant obstacle.
Automakers like Honda, Volkswagen, General Motors (GM), and Ford initially pledged big investments, with their commitments stacking up to about $46.1 billion. On top of that, they were counting on $52.5 billion worth of government incentives and support, from federal and provincial governments combined. But, as you might guess, trade tensions threw everything into disarray. This especially hit Ontario’s auto industry—Canada’s auto manufacturing hub. GM, for instance, decided to shut down their CAMI plant, which made electric delivery vans. Ford and Stellantis announced pretty hefty losses, partly because of tariffs, and both have delayed or even paused EV production lines right here in Canada.
Battery manufacturers, as you can imagine, weren’t spared either. The biggest blow perhaps was when Swedish firm Northvolt scrapped its $7 billion battery plant project in Quebec, which cost the provincial government a hefty $270 million. That was a serious setback. Things didn’t get much better with the $5 billion NextStar EV battery factory in Windsor, built by Stellantis and South Korea’s LG Energy. Canadian contractors have filed lawsuits claiming they weren’t paid for work done there, despite the plant receiving billions in incentives.
Trade frictions only made the situation worse. Since 2024, Canada slapped a 100% tariff on EVs imported from China to protect domestic industries—though China dominates about 70% of global EV production. Meanwhile, on the U.S. side, Trump’s tariffs put a 25% tax on Canadian auto exports, hurting the sector’s competitiveness significantly. Ontario’s Premier Doug Ford, along with others in the industry, has openly pushed for the federal government to drop the mandates that require EVs to make up 20% of car sales by 2026 and a full 100% by 2035, arguing that these targets are just too tough to reach given the current trade and sales situation. Yet, Environment Minister Julie Dabrusin stands firm, saying the government remains committed to those goals despite the opposition.
All these factors have specifically hurt Honda quite badly. The Japanese automaker announced a 59% drop in operating profit for its fiscal year ending March 2026—much of that decline being tied to tariffs. They’ve also pushed back their huge $15 billion EV investment plan in Ontario by two years. This project was supposed to involve creating new battery and component plants—and vehicle assembly lines—to ramp up capacity to about 240,000 vehicles each year by 2028. Plus, it was meant to preserve thousands of jobs. Honda’s decision underscores just how uncertain the market and economic conditions have become—thanks, in part, to tariffs and protectionist policies making things pretty unpredictable.
This turbulence isn’t just affecting automakers—consumer incentives, for example, have taken a hit too. The Canadian government froze all rebates to Tesla, also excluding Tesla from any future EV incentive programs because of the tariffs imposed by the U.S. They also blocked around $43 million in rebates from going to Tesla, which has caused a lot of debate. Many see this as a tricky situation for Canadian EV buyers and manufacturers caught between trade conflicts and policy hurdles.
Despite all these rocky developments, some analysts remain optimistic that, in the long run, the EV transition can still move forward. Lindsay Wiginton from Dunsky Energy points out that estimates still suggest that by 2025, about 25% of global car sales could be electric—mainly because battery prices are falling sharply. Matthew Fortier, CEO of Accelerate, emphasizes that for Canada, maintaining and leveraging key strengths—like its critical minerals and cutting-edge battery tech—will be essential for carving out a meaningful role in North America’s supply chain. The fact that about 93% of vehicles made in Canada are exported to the U.S. means that the ongoing tariff battles with the U.S. are a big, impactful factor.
In tandem, Panasonic, which supplies batteries to Tesla, is feeling the squeeze too. They’re under pressure from their biggest client, Tesla, to speed up their domestic battery production in Kansas, a move partly driven by U.S. policy incentives that favor local manufacturing. Despite some cutbacks industry-wide, Panasonic plans to boost capacity by about 60% by 2027. This shift actually reflects how protectionist policies are reshaping the entire manufacturing landscape in the EV world.
Looking ahead, most experts agree that Canada’s best bet is to deepen its manufacturing strength—particularly upstream in mineral processing and battery tech—to gain some leverage in negotiations and be more resilient to future tariff spikes. The recent U.S.-Japan trade deal, which lowered American tariffs on Japanese cars, might put some pressure on U.S. policymakers to reconsider tariffs on Canadian vehicles, but honestly, that’s still a bit uncertain and evolving. Meanwhile, the Canadian auto industry, especially centered in Ontario, faces immediate pressures—a combination of tariffs and delayed investments—even as the global EV market keeps growing and evolving.
Source: Noah Wire Services
