The federal government’s proposed zero-emission-vehicle sales mandate aims to increase vehicle availability and help cut costs for battery electrics. But the legislation is likely to raise, not lower, upfront prices for car buyers, at least in the short term, industry experts warn.
The first modern EVs have been on the road for more than 10 years. During that time, the price gap between EVs and internal-combustion-engine (ICE) vehicles has only widened, said Robert Karwel, senior manager of the Canadian automotive practice at J.D. Power.
“The gap’s rising, not falling,” he said, pointing to J.D. Power data showing that the average transaction price for an EV today is about $14,000 higher than the average price of an ICE vehicle. That’s without government incentives.
The price discrepancy is not entirely the fault of EV technology, Karwel said, but a result of Canadians’ decades-long embrace of larger vehicles.
“We are ramping up a lot of much nicer, larger, heavier, more lavishly equipped EV offerings, hence prices are rising,” he said.
Compared with the car-dominated streets of the past, 85 per cent of Canadians today buy SUVs or pickups, Karwel said. This trend extends into EVs, where large, costly batteries are needed to propel increasingly weighty vehicles, he said.
RULES RAISE PRICES
For automakers, the pace of regulatory change and the challenge of rapidly establishing a supply chain for EVs in North America will come at a cost, said Stephen Beatty, vice-president and corporate secretary at Toyota Canada.
“The impact of that is, frankly, ... going to drive up transaction prices on vehicles,” Beatty said. “It may limit choice in the marketplace as we move forward, at least through to that 2035 period,” the year by which all new passenger vehicles and light trucks sold must be ZEVs.
Toyota, the largest producer of vehicles in Canada and the country’s third-largest automaker by sales last year, is typically seen as lagging in the transition to EVs. The company has been a vocal opponent of the federal ZEV mandate. Toyota maintains that material supply challenges for lithium and other metals will push vehicle prices upward, undercutting affordability.
The federal government also warned about higher vehicle prices stemming from the mandate as it laid out its draft ZEV regulations at the end of 2022.