Automakers are preparing for an even more difficult time selling electric vehicles (EVs) in Canada.

Canada is pulling back on electric vehicle subsidies just as it aims to phase out gas-powered cars, creating what General Motors Canada’s President Kristian Aquilina calls a misalignment between support and expectations.

With less financial incentive for consumers and increasingly stringent sales targets, automakers face growing challenges in Canada’s push for an all-electric future.

Shrinking government incentives for EV buyers

Currently, consumers in Canada can take advantage of significant savings when buying electric vehicles, with rebates totaling up to C$12,000 (about $8,500). These subsidies include a federal rebate of up to C$5,000, while Quebec and British Columbia offer additional incentives of up to C$7,000 and C$4,000, respectively.

These rebates have driven EV adoption in Canada, particularly in provinces with higher incentives, such as Quebec and British Columbia, which have seen substantially higher market shares for EVs than Ontario, where rebates were canceled in 2018.

But this support is fading. Quebec recently announced that its subsidy would be phased out entirely by 2027. In British Columbia, rebates were limited to a narrower group of EV buyers this June, as government officials pointed to “available funding” concerns and higher-than-expected EV sales growth. These rollbacks reflect a broader trend, with provincial governments reassessing the financial viability of taxpayer-funded EV incentives amid growing budget deficits.

Without the substantial incentives that have driven much of Canada’s EV market growth, GM and its peers must rely on things like better infrastructure and customer education to keep growing their EV sales. For GM, that challenge is amplified by its lack of profitability right now around its EV offerings.

The Canadian market will be a proving ground for whether automakers can drive EV adoption in the absence of government subsidies. As the industry pushes toward an electrified future, manufacturers will likely need to innovate not only in EV technology but also in financing options and infrastructure solutions to make EVs a practical, affordable choice.