Tesla is not having the best of times in Canada. Reports published on March 25 stated that Canada had frozen all rebate payments for Tesla and banned the EV maker from future EV rebate programs. What led to this decision was something grave. Let us start by looking into the facts as they unfurled.
In January, four showrooms across three major Canadian cities sold 8,600 cars within a weekend. The spike followed the news that Canada would no longer help fund part of the purchase price for new electric vehicles under its iZEV program. The Government of Canada had announced that incentives for the Zero-Emission Vehicles (ZEV) program funds were fully committed and that the ZEV program was now officially paused. Following this announcement, Tesla sold about 8,600 cars in three days at four separate stores in Canada—roughly one every two minutes per showroom. The sales equated to nearly 18% of Tesla’s annual volume in the market.
After this spike, the Canadian authorities launched investigations into ascertaining whether Tesla unlawfully gained business by securing CAD 43 million (US$30 million) in government subsidies for its customers. The move resulted in the freezing of funds until the matter could be resolved.
Transport Minister Chrystia Freeland, in her statement to the Toronto Star, said, “No payments will be made until we are confident that the claims are valid.”
There were reasons for the authorities to seek more clarity. A spike was not unexpected. But the spike was unusually high. Looking into the filing of Tesla orders, which typically happen online rather than at a physical store, showed that two cars were sold every minute of every hour for three days straight. Moreover, according to Quebec-based Motor Illustrated, Tesla accounted for 89% of all claims filed during that period. A single dealership in Quebec City recorded more than 4,000 vehicle sales over a weekend.
What intensified Canada’s scrutiny of Tesla’s sale was the ongoing tariff war between the US and Canada. On April 3, 2025, the US President Donald Trump announced reciprocal tariffs. The White House Authorities confirmed that the new tariffs would not apply to Canada and Mexico due to existing orders under the International Emergency Economic Powers Act (IEEPA), related to Fentanyl and migration. Under these measures, non-USMCA-compliant goods would face a 25% tariff, while non-compliant energy and potash imports would be taxed at 10%. However, USMCA-compliant goods from both countries would continue to be exempt from tariffs, and if the IEEPA orders were lifted, a 12% tariff would apply to non-compliant goods.
Also, observers did not miss Trump reiterating his long-standing grievances against Canada. They cited the president’s false claims that the United States subsidised Canada by US$200 billion annually.
However, what stood out as the most striking to the specific issue we are discussing today was President Trump’s announcement of a separate 25% tariff on all foreign-made automobiles. It was seen as a move that could significantly affect the Canadian auto industry.
This tariff war between the two countries had a decisive role in the Canadian Transport Ministry’s decision, which was directed by Chrystia Freeland:
“To change the eligibility criteria for future iZEV programs to ensure that Tesla vehicles will not be eligible for incentives so long as the illegitimate and illegal US tariffs are imposed against Canada.”
The Canadian city of Toronto had stopped providing financial incentives for Tesla vehicles purchased as taxis or ride shares because of ongoing trade tensions with the United States.
Several other incidents of discontent were reported from across Canada. For instance, the Vancouver Auto Show scrapped Tesla from its lineup. Vancouver International Auto Show is Western Canada’s largest automotive event, where around 200 vehicles have been presented over five days since March 19. Leading manufacturers such as Cadillac, Ford, Hyundai, Chevrolet, Toyota, and Kia showcase their latest vehicles at the event. The New York Times reported incidents of Canadians turning on Tesla and becoming physical with it. More than 80 Teslas were damaged in Hamilton, Ontario, the police said, amid other acts of vandalism against the company.
With all these serving as a backdrop, reports suggest a concerted effort is underway among Canadians to rebuild economic independence in the face of Trump’s auto tariffs. Reportedly, there is renewed interest in innovative homegrown alternatives.
In the coming segments, we delve deeper to assess how mature and sincere these efforts are and how effective they could become.
Click here to learn how Canada has imposed 100% tariffs on Chinese EVs.
Project Arrow
Undoubtedly, Project Arrow has been the most attention-grabbing and the most ambitious effort so far.
In 2023, the Automotive Parts Manufacturers’ Association of Canada, also known as APMA, launched the first, original, full-build, zero-emission concept vehicle named Project Arrow. The cutting-edge prototype initiative of Project Arrow, valued at 20 million dollars, secured 8.2 million dollars in funding from its federal and provincial partners in Canada, Ontario, and Quebec. It emerged as the most significant industrial collaboration in the Canadian automotive sector’s history, involving as many as 60 partners.
The Globe and Mail described Project Arrow as an “audacious play to build an all-Canadian electric car.” In building it, the project would address many challenges of the Canadian electric vehicle ecosystem, including supply chain production, mineral production capacity, and cybersecurity threats. The project will introduce innovative sub-assembly methods and combine those with advanced manufacturing technologies. To ensure that the project keeps evolving and stays ahead of time, APMA will collaborate with municipalities and academic institutions to provide a testbed for research and a cooperative network to tackle ecosystem challenges.
Companies that have done exceedingly well in their fields of expertise have also made significant contributions to Project Arrow. For instance, the company LeddarTech (LDTC -0.52%) is a leader in developing and providing comprehensive perception software that proves effective in the deployment of ADAS and autonomous driving applications. LeddarTech collaborates with Project Arrow to develop the latter’s ADAS features. It procured various sensors for Project Arrow and supported it with LeddarVision, a low-level sensor fusion and perception software that combines the data from the vehicle’s different sensors, such as cameras, radar, and lidar. LeddarTech solutions helped empower the ADAS applications on Project Arrow so that they could perform better with greater accuracy and reliability.
Cybeats, a leading SBOM management and software supply chain intelligence technology provider, came on board as Project Arrow’s ‘Official SBOM Management Provider’ and was also designated as its cybersecurity advisor.
While elaborating on Cybeats’ involvement in Project Arrow, Flavio Volpe, the President of APMA, had the following to say:
“Cybeats’ technology is enabling the world’s first automobile with complete software supply chain transparency. Every modern electrified vehicle has a dramatically larger digital footprint than the internal combustion engine platform it replaces. The integrity and security of that footprint must be a foundational element of vehicle design and we are excited to work with Cybeats to ensure the Project Arrow concept vehicle serves as a prime example of this vision.”
Mr Volpe’s comment on Cybeats’ involvement reveals many aspects of Project Arrow and its uniqueness.
Many other Canadian companies made relevant contributions. For instance, Quebec-based Fastco Canada supplied the stylish wheels, while VoltaXplore, a joint venture between Martinrea International Inc. and graphene company NanoXplore, made the battery. Reports suggested that the only component that did not come from Canada was the dashboard display. It was supplied by the Chinese company Lenovo.
In November 2023, when Project Arrow 2.0 was launched, Flavio Volpe, president of the Automotive Parts Manufacturers’ Association (APMA), said the following in an interview:
“This time we have a vehicle, we have a design, we have the engineering. It is an evolution of the product and the platform. Project Arrow is more than just about a car. It should be about the entire Canadian movement into the [EV] space.”
The comment summed up the project’s mission conclusively. Volpe saw Project Arrow 2.0 as a series of unique vehicles, each containing a custom blend of talent and innovation.
“We’ve got a series of different options. Let’s call it Arrow 2.1, 2.2 and 2.3 to be the showcase for how you lightweight an EV. And it might be that in Windsor, you do something with advanced propulsion, so that would be Arrow 2.4. Certainly, across this country, some clusters need to come into play here.”
– Volpe
Expectations are rife that the number of Arrow vehicles will increase nearly 20-fold in the next generation of the project.
Volpe believes that Arrow will act as a catalyst, knitting together industries and players that need to communicate as transportation moves towards electrification.
While Project Arrow is the most discussed and hyped alternative to emerge in the Canadian EV space, another company has been significantly successful in moving the movement forward. That company is CanEV.
CanEV
Founded in 1995, CanEV designs, manufactures, and supplies electric vehicles and components, catering to a global market with a diverse product line that meets the needs of universities, government sites, industries, parks, municipalities, and private companies worldwide.
CanEV products include the Might-E Truck, Might-E Tug, and Specialized vehicles.
Might-E Truck, CanEV’s flagship product, is a custom-built, heavy-duty electric utility vehicle that is road-legal under Transport Canada’s Low-Speed Electric Vehicle regulations. With a top speed of 40 km/h, it’s perfect for downtown maintenance, local garbage pickup, and groundskeeping. Each truck is built from the ground up in CanEV’s facility using North American automotive parts.
The Might-E Tug is a robust electric towing unit capable of hauling up to 10,000 pounds. It is designed for versatility and power.
The company’s specialized vehicle product line includes its three-ton aircraft refueling and LAV trucks, which serve airports across North America, Europe, the Middle East, and Australia. Over 70 units are in operation.
Apart from products, CanEV’s experienced team of technicians and engineers offers contract research and development services, designing and prototyping electric vehicles for unique industrial applications. From hospitals and ferry terminals (like BC Ferries) to airports (including Hong Kong) and manufacturing plants (such as Boeing and Detroit Diesel), CanEV’s custom solutions are available in many major global locations.
Moreover, the company provides everything needed to convert a combustion engine vehicle to a zero-emission electric vehicle. It offers a wide range of kits, parts, and accessories for any project, including electric powertrain parts and accessories such as heating and cooling systems, power steering and brakes, and specialty instrumentation.
Canadian EV Landscape: Future Opportunities; Present Challenges
The EV market in Canada is set for steady growth. Estimates suggest the revenue in the Canadian auto market will reach US$8.4 billion by 2025. Between 2025 and 2029, the market could witness a CAGR of 10.05%, resulting in a market volume of US$12.4 billion by 2029. In terms of unit sales, the market will reach a figure of almost 250K vehicle units by 2029.
However, for the Canadian EV industry to grow at a moderate pace, it would have to be well aware of what it has done well so far and what areas need improvement. In the coming segment, we look into the results of CAA’s largest-ever survey of Canadian EV drivers. The survey included 16,041 Canadian EV drivers to understand their preferences and experiences with electric vehicles.
When asked if EV owners would buy another EV in the future, 87% said they are likely to repurchase an electric vehicle. More than 90% of EV owners said the cost of fueling their EVs is much better, and 79% said the cost of maintenance is much better than their previous gas-powered vehicles.
EV drivers reported that most of their travel time was within 100km of their home. When asked the same question, BEV drivers indicated that they travelled an average of 398 kilometres per week, while PHEV drivers travelled approximately 322 kilometres. Overall, the majority of trips for BEV and PHEV drivers are relatively short, typically staying within 10 kilometres of home.
In Canada, one of the most significant challenges faced by EV drivers is the scarcity of charging stations. Only 31% of EV drivers were completely satisfied with the availability of public DC fast charging locations. Fast charging remained limited, especially in less urban provinces.
Tire cost and replacement frequency were also higher. A third of EV drivers reported their gas vehicle required fewer tire changes, and replacements were cheaper. Battery range in cold weather presented another issue—67% said lower battery range in extreme cold weather has been a persistent problem since owning an EV.
Charging, in particular, posed difficulties for multi-unit dwellers and renters. Multi-unit buildings with communal, open parking areas often find it difficult to install reliable electrical outlets—especially higher-power 208- 240V outlets—or to hardwire chargers. Renters, meanwhile, frequently needed landlord approval to install a charger, and many were unwilling to pay to install a charger in a home they do not own.
In this context, one needs to remember that the cost of owning an EV is a multi-component affair that includes the cost of installing a home charging station, the cost of insurance, maintenance, and repair, and the cost of home electricity incurred due to charging.
With the current trade war between the US and Canada ongoing, Canada would have to steer ahead with much caution. Analysts suggest that EVs already face the disadvantage of sitting at the top end of an already pricey market. High prices will reduce demand, and automakers will find it increasingly difficult to scale at a good pace.
According to a 2024 study by Natural Resources Canada, 40,000 public EV charging stations need to be installed every year between 2025 and 2040 to support the federal government’s mandate that all new vehicle sales be zero-emission by 2035. Right now, there are only about 30,000 public EV charging stations across Canada, with a mere 6,703 new ones installed last year.
EV consumers in Canada need to be reassured through actions and not just words and commitments that they’ve made the right choice. However, the silver lining amidst all these is that initiatives like Project Arrow are emerging fast and taking the challenge head-on. It is receiving cutting-edge technological support from across the globe, and companies like CanEV are filling in the gaps well. Seemingly, the tides will turn in favour of Canada sooner than expected.
Learn about Volkswagen and Honda’s plan to set up an EV battery manufacturing unit in Ontario.