Electric cars at a dead end

Last year, 16% of new vehicles in Quebec were electric. Question: will we reach the required 45% in three years? Or even 75% in five years?1

The answer is important because it appears in the Quebec government’s ambitious plan to reduce our greenhouse gases. And the 45% target isn’t aesthetic: if manufacturers don’t meet it, they’ll have to pay a hefty fine, the equivalent of $20,000 per car that doesn’t sell below that target.

In other words, for every 100 vehicles sold, if the government’s target is 22 electric vehicles, a manufacturer that sells only 19 would have to pay a penalty of $60,000. Oh!

That exact 22% target is the level Quebec is asking for the 2025 model year, which dealers are starting to sell these days. And that goal has bounced around over the years.2

Note that Quebec is not the only one implementing this demanding VZE standard, which stands for Zero Emission Vehicles. The federal government recently implemented a very similar standard, as did British Columbia and Quebec.

And in the United States, eleven states also have a ZEV standard, including California, Colorado, Massachusetts, New Mexico, and New York. Therefore, by 2027, more than 40% of the North American market will incur heavy fines for non-compliance.3

The ultimate goal of these goals is to encourage manufacturers to work harder on electric vehicle (EV) production. And force them to either lower the price of EVs to increase sales or raise the price of polluting SUVs to fund the $20,000 fines.4

However, two headwinds blow against these goals. First, EV sales growth is slowing worldwide, mainly due to high vehicle costs. Some manufacturers, such as Ford, have also cut planned production.

Then experts are trying to figure out how manufacturers manage to turn the corner so quickly in terms of production capacity.

A recent study from the CD Howe Institute5 it concludes that it will not be possible to meet the demand for EVs from 2028, given the expected pace of factory construction and the impact on production chains. It even estimates that by 2035 – when 100% of new vehicles are expected to be electric by regulation – it will not be possible to fulfill half of EV sales.

Author Brian Livingston notes that the ZEV standard in the United States and environmental policies risk pulling sales there, causing inventory shortages in Canada. “Policymakers would be better off abandoning the perfect 100% ZEV target and adopting a more realistic target that still delivers good results,” he writes.

The target requirement resonates particularly in Quebec. Some environmentalists believe that the bar is set too low given the climate emergency that has been repeatedly demonstrated. However, this goal remains the strictest of the North American states I could compare.

For example, in 2027 the target is 45% in Quebec compared to 35% in California. Or even 75% in 2029 compared to California’s 63%.

In Quebec, electric cars will account for approximately 16% of new vehicle sales in 2023, a larger share than anywhere else in Canada, except for British Columbia (18%).1

And we can expect a small boom in demand in Quebec before the subsidy from the Roulez vert program is removed at the end of 2026, but what happens after that?

Among the dealerships, the end of the Roulez vert is a shock. “The decision to abandon purchase subsidies while maintaining target-based sanctions is a major distancing from the Quebec government,” argues the Corporation of Quebec Automobile Dealers, which says the price parity of electric cars and gasoline is far from being achieved. .

Like dealers, car manufacturers are criticizing the end of the Roulez vert. As for the restrictive targets and $20,000 fines, they believe they could cause perverse effects.

For example, some manufacturers might prefer to reduce sales of gasoline vehicles in Quebec to avoid sanctions rather than increase sales of EVs. In other words, manufacturers could play in the denominator of the EV target equation rather than the numerator, which could cause shortages of gasoline vehicles.

“We would be offering consumers less choice, which would hurt the dealership and the economy,” Patrick Maltais, director of Quebec affairs at the Global Auto Manufacturers of Canada, told me.

According to Mr. Maltais, it is hardly possible to sell smaller and cheaper electric cars in Quebec like in Europe (for example Volkswagen ID3). Why ? Because even if there were some market for these smaller EVs, it’s North American demand that dictates manufacturers’ decisions, and that demand rejects small vehicles.

At the Quebec Ministry of the Environment, we are still optimistic about reaching the binding targets. First, many manufacturers have significant credits in the bank for EVs sold in the past that can be applied to future goals.

Then EV prices will eventually drop, the ministry betting, as it does with all new technology, that more affordable models will be offered. Finally, the government is ensuring that the charging network ramps up quickly, which will give consumers confidence.

“We are confident that most manufacturers will meet the ambitious requirements of the ZEV standard,” a political attache wrote to me.

Despite everything, my question remains: will we reach the required 45% in three years? I don’t think there is a dead end in sight.

1. In this 16% share for 2023, a plug-in hybrid equals half an electric car, as required by Quebec’s 2025 zero-emission vehicle (ZEV) standard. From the 2025 model year, plug-in hybrids are only hybrids with with an electric range of more than 80 km will be eligible for this half credit (a partial credit will be provided for plug-in hybrids with a range of 50 to 80 km until 2027).

2. Small manufacturers (who sell less than 4,500 vehicles per year in Quebec) are not subject to the law. This is the case with Jaguar, Land Rover, Porsche and Volvo.

3. See “Canadian Accessibility Standard for Electric Vehicles”

4. Manufacturers can also buy the missing credits from other manufacturers who have too many – like Tesla – but the evolution of government requirements is such that within three years this escape route will no longer be possible in a way.

5. Check out the CD Howe Institute study

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