Who is going to buy all of these EVs?

This opinion was written by Ashley Nunes and was published in the Globe & Mail on April 26, 2024. Ashley Nunes is a senior research associate at Harvard Law School, who teaches economic policy at Harvard College

The largest deal in Canadian history. That’s how Premier Doug Ford has described a recently inked agreement between Ontario, Ottawa and auto giant Honda, officially announced Thursday. Under the terms of the agreement, Honda will pump billions into building an electric-vehicle assembly plant. For the automaker, the plant would be the first of its kind in Ontario; for the province, the third after automakers Stellantis and Volkswagen inked similar agreements last year. In touting the virtues of the agreement with Honda, the Premier said, “everyone’s going to benefit.”

But that’s not true. Not everyone. The move saddles Canadians with a product for which enthusiasm is tepid at best.

Down the line, when a lack of return forces these automakers to rethink their investments, we may ask ourselves: What were the billions given to these companies actually for?

According to the politicians’ narrative, EVs are purportedly what people want. Worried about the Earth’s rising temperature, and eager for change, the public demands a future that is cleaner and greener. Consumers are – politicians keeps emphasizing – keen on going electric. “There is clearly demand for EVs in Canada,” proclaimed Environment Minister Steven Guilbeault late last year. Naysayers, he continued, “should get on board.”

That last comment was admitted ly directed toward provincial lawmakers. But it might as well be directed toward voters.

Across the world, annual EV sales have been rising over time but sales growth is slowing and enthusiasm is waning. A recent survey found that in 2024, 46 per cent of Canadians were interested in buying an electric vehicle, down from 56 per cent in 2023 and 68 per cent in 2022. More worryingly, not even these numbers (nor those in any poll I’ve seen) fully capture consumer hesitation toward EVs.

Take 2023, a year when new vehicle sales in Canada topped more than 1.6 million. If you believe consumer surveys, EV sales should have totalled more than 900,000 (56 per cent of Canadians expressed interest in going electric remember?). The actual number of EVs sold in 2023? Fewer than 186,000. The same goes for 2022, when just EVs accounted for just 8 per cent of sales despite 68 per cent of Canadians reporting interest in bolt-powered autos.

Of course, one party is certain to benefit from the Honda deal, and that is Honda. The Liberals’ budget, which has yet to pass Parliament, offers a 10 per cent tax credit for building plants that support EVs. Honda’s investment costs are estimated to equal more than $14-billion. You do the math.

For good measure, the likes of Honda are also being promised a 30-per-cent manufacturing investment tax credit. And if that weren’t enough, Mr. Trudeau and Mr. Ford have also (and separately) each committed $131-million to Honda to boost domestic car production. For EV manufactures in Canada, the adage seems true: when it rains, it pours. One might argue that there is justification for all these EV plants, given the Prime Minister has promised that new gas-powered autos will be unavailable for sale by 2035. And by 2026, just two years from now, automakers must commit to ensuring that at least 20 per cent of vehicles sold here are electric. For good measure, Ottawa has promised to fine manufacturers who don’t comply. Across the world, similar policies have popped up.

I suppose that’s one way to do it. Consumers may be reticent about EVs but give them less (and eventually no) choice and – voila. But consider what such EV mandates are enforcing: It’s on automakers to sell people cars they don’t want, can’t afford and barely meet the performance expectations (think range) they have grown accustomed to.

For its part, Ottawa has glossed over these concerns, instead emphasizing impending price parity – the idea that EVs will soon cost the same as non EVs. Except we’ve been hearing this talking point for years. In 2017, analysts predicted price parity by 2025. In 2021, that forecast was revised upward to 2026. Now, the Environment Minister is talking about seeing price parity later this decade or in the early 2030s.

Forcing consumers to buy EVs won’t be a popular move. Luckily, and as the Prime Minister like store mind us, his job is, “not to be popular.” Neither the Canadian government’s EV mandate nor those of other jurisdictions are unlikely to last in their current form – and without forcing EVs on the population, there is no way uptake will be large enough to justify all the billions Ottawa has been throwing at the automakers.