Automakers, dealers face challenges as ZEV mandate looms, panel says

With one year to go before automakers begin introducing vehicles for the first model year covered by the federal zero-emission vehicle sales mandate, stakeholders from across the industry see a large hill left to overcome, though recent progress on adoption could lessen the steepness of the climb. 

“We have exactly a year to get ready for this,” Stephen Beatty, vice-president and corporate secretary of Toyota Canada Inc. told attendees at Automotive News Canada Congress in Toronto Feb. 15. 

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“There’s been a lot of debate over a lot of time, but there really hasn’t been enough work to lay the foundation for people to bring battery-electric vehicles into the marketplace at the level that they need to be at in order to hit the targets.” 

Beatty was among four panelists to weigh in on the state of EV uptake in Canada and the achievability of Ottawa’s ZEV targets. 

Recently finalized regulations will require ZEVs make up 20 per cent of new light-duty vehicle sales by 2026, 60 per cent by 2030 and 100 per cent by 2035. Automakers failing to hit the sales targets face penalties of $20,000 per vehicle. 

Beatty did not directly address whether Toyota will meet the government’s 2026 targets, but stressed that the company has more battery-electric and plug-in hybrid vehicles — which also qualify as ZEVs if they have large enough battery packs — on the way. 

But the affordability of those and other ZEVs is top-of-mind for cash-strapped consumers. 

'VERY EXPENSIVE VEHICLES'

J.D. Ney, the Canadian auto practice lead for J.D. Power, said other ZEV adoption concerns such as charging infrastructure and range anxiety have been superseded by cost.  

“They remain very expensive vehicles in this market.”

Yet the mismatch between the upfront cost of ZEVs and internal-engine vehicles is less of a factor when comparing total cost of ownership, according to Elias El-Achhab, COO of Kia Canada. 

Savings yielded from powering a vehicle with cheap electricity versus gasoline add up quickly, he said. And as is well-known in the industry, El-Achhab added, vehicle buyers are mainly focused on their monthly payment, meaning if automakers and dealers can highlight the operational savings ZEVs offer, consumers are more openminded about the new breed of vehicles. 

“There’s a lot of lack of education, or miseducation about EVs” and “we have to do a better job” of getting more data-driven information across to consumers, he said. 

HIGH-COST EVS FIRST

In addition to this, a lot of automakers have concentrated on first bringing out higher-cost ZEVs to showcase the full capabilities of their technologies, El-Achhab said. He pointed to Kia’s EV9, which starts at $63,294, including $3,049 delivery, as one example. 

“That’s not going to be the affordable EV for everybody.” 

With the EV9 set as the brand’s “ceiling,” three other models are already scheduled to launch with lower price tags, he added. 

But while ZEV sales growth continued through much of 2023 — the category made up a record 12.1 per cent of Canadian sales in the third quarter, according to the latest data available from Statistics Canada — the momentum isn’t uniform. 

Demand, Ney said, fluctuates significantly based on segment and brand. Buyers of $200,000 BEVs have become scarcer, but more affordable ZEVs in popular segments are still “flying” off lots, he said. 

EVS 'TOUGHER CHALLENGE' FOR DEALERS

Shahin Alizadeh, CEO of Toronto’s Downtown Auto Group that represents nine different brands has seen the issue play out at the store level. 

He pointed to the Ford F-150 Lightning as a model that’s proven “a much tougher challenge” to sell than first expected.

“To try to force-feed Lightning into the F-Series market has been an impossible task.”

While the electric pickups were in high demand for a few months post-launch, many are now building up on lots, he added. 

And as the government mandate forces automakers to sell more ZEVs to avoid being penalized, Alizadeh said dealers can’t be expected to take inventory consumers aren’t interested in buying. 

“The industry’s no longer prepared to absorb those types of business relationships where we just say, ‘Okay, here’s 300 cars, and Bob’s your uncle, so go and sell them.’ 

“To me, that’s just going to create more friction between the retail network and the OEMs if the supply and the inventory levels aren’t aligned.” 

Beatty acknowledged the automaker-dealer dynamic could be put to the test with the new ZEV rules, but he’s also skeptical the new legislation will be the final word. 

“California’s often held out as being the example here in North America of how to get this done, but people tend to forget that California changed their strategies multiple times. 

“They came up against deadlines, they discovered it wasn’t working, they changed it, they became more sophisticated, and I expect that’s what’s going to happen here in Canada as well.”