EV sales in Canada rose in recent years despite higher interest rates. Why?

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EV sales in Canada rose in recent years despite higher interest rates. Why?
Higher interest rates have force many Canadians to delay or cancel large purchases. But data shows sales of electric vehicle, typically more expensive than gas-powered cars, continued to rise. Nathaniel Dove explores the trend and what it means for the federal government's goal of phasing out gas-powered car car sales by 2035 – Apr 24, 2024

Despite rising interest rates making many things more expensive, Canadians bought more than three times as many electric vehicles (EVs) last year than they did in 2019, data shows.

But experts caution the federal government’s target of having only zero emission vehicles sold by 2035 still faces challenges, and dropping Tesla sales have raised questions about stability in the EV market.

New vehicle registrations for battery, hybrid and plug-in electric cars rose to more than 320,237 in 2023 from 94,500 in 2019, according to Statistics Canada figures. When removing hybrid electrics from the calculations, since they emit greenhouse gas emissions, the numbers still rise to 184,578 new EV registrations in 2023 from more than 56,000 in 2019.

The Bank of Canada’s trend-setting interest rate fell from 1.75 per cent to 0.25 per cent and then rose sharply to 5.0 per cent in the same time period.

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EVs are typically more expensive than gas-powered cars but new EV registrations continued to rise even when interest rates were at their highest.

The high rates pushed home sales down over the same time, according to a Royal LePage report released earlier this month.

Concordia University economics professor Moshe Lander said the registration increases show sales may have been even higher with lower interest rates.

Click to play video: 'Canada’s drive to expand its electric battery supply'
Canada’s drive to expand its electric battery supply

“Just because things are rising doesn’t mean that interest rates are having no effect,” he said, speaking from Calgary.

He said those buying EVs are likely people doing so for environmental reasons. The trend has now gone beyond the “high wealth, high income earners,” who are typically first adopters of new technology, to include middle income Canadians. One fifth of the vehicles sold last year fall were EVs or hybrids.

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“When you’re getting to that point of 20 per cent of vehicles being sold, you’re certainly beyond the one percenters, who probably already have their electric vehicle,” he said, speaking from Calgary.

He cautioned those who have already bought EVs may represent “low-hanging fruit, the ones that are most adaptable to using an electric vehicle.”

“I think the biggest problem with electric vehicles is that as they become more common, we’re not seeing the infrastructure develop around them.”

That’s also the challenge spotted by Tim Reuss of the Canadian Auto Dealers Association, an industry group.

“If people cannot charge their vehicles where they live, work and play, it will be very, very difficult to reach the goals that have been laid out when it comes to the transition to EVs,” he said, speaking from Toronto.

Reuss said that’s why Canadians in different provinces have started driving EVs at different rates.

The StatCan data shows around 40 per cent of new EV registrations each year took place in Quebec, with large numbers of EVs also being registered in Ontario and B.C.

The Quebec provincial government offered a $7,000 subsidy for electric and plug-in hybrids but is phasing it out by 2027. The federal government offers a $5,000 subsidy.

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Reuss also said EVs remain largely impractical for rural drivers.

“The transition is starting to happen, but it is happening unevenly,” Reuss said.

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He and Lander said the speed of the transition to electric depends on how quickly federal, provincial and municipal authorities.

The federal government unveiled new regulations for EVs in December that include incentives and fees for automakers to sell EVs and build charging stations.

Reuss said the policy needs to better tailored to rural and urban areas and between the provinces.

Moshe said the federal government missed an opportunity to put more money towards the transition in the recent federal budget.

“It could happen in three years. It could happen in 30 years. It’s now in the hands more of government than it is of the buyer themselves,” Lander said.


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