The Kia EV6 rolled out early last year at $44,995, not including shipping, just below the $45,000 eligibility threshold for the federal iZEV program. A few months later, the base-model eligibility threshold was increased to $55,000 for cars. For 2023, the EV6 started $2,500 higher at $47,495, which AutoTrader.ca road test editor Dan Ilikasaidis“prettytelling.”
Federal and provincial incentive programs for zero-emission vehicles are pitched to Canadians as a way to make the transition to electric vehicles more affordable for consumers. But according to industry experts, it’s automakers that are reaping most of the benefits.
“The incentives that [governments] give to EVs actually lift the price of EVs,” said Sam Fiorani, vice-president of global vehicle forecasting at U.S.-based AutoForecast Solutions.
The federal program provides a $5,000 rebate for battery-electric vehi- cles as well as plug-in hybrids with electric range greater than 49 kilome- tres. PHEVs with less range qualify for $2,500.
The same eligibility criteria applies to both BEVs and PHEVs. Zero- emission passenger cars start-
ing at less than $55,000 and high- er-cost variants up to $65,000 quali-
fy for the incentives. Larger vehicles such as pickups, minivans and SUVs must have a base price of less than $60,000, and higher-cost variants must start at less than $70,000. Higher-cost trim levels are not eligible.
Instead of maintaining the free-market pricing automakers would otherwise use, Fiorani said, they bake in the value of the rebate and try to land on post-incentive sticker prices that stay palatable for consumers. Most government incentives go to automakers to bankroll their EV transitions, while consumers end up with something very close to the bill they would have paid if the incentives weren’t available, he said.
As a clear-cut example of the dynamic, Fiorani pointed to the U.S. pricing of the Chevrolet Bolt.
“When the U.S. had their initial $7,500 incentives, vehicle prices were roughly $7,000 higher than what they would have been in a natural economy,” he said. “That got reflected when companies like Chevrolet lost the incentives, and Bolt prices dropped by $7,000.”
EV pricing adjustments made in response to changes in incentive programs are occurring in Canada as well.
Dan Ilika, road test editor at AutoTrader.ca, pointed to the Kia EV6 hatchback as a “perfect example.”
The EV6 premiered early last year in Canada at $44,995, not including delivery charges, which was a few dollars below the previous eligibility cap of $45,000 for the federal Incentives for Zero-Emission Vehicles (iZEV) program.
A few months later, however, Ottawa bumped its base-model cap to $55,000 for cars and $60,000 for pickups and SUVs.
For 2023, the EV6 started $2,500 higher at $47,495, which Ilika said is “pretty telling.”
“I honestly don’t believe that that price would have increased had the iZEV price cap stayed at $45,000,” he said.
Kia Canada, meantime, pointed to “current market realities,” including rising material and labour costs, for the EV6’s price increase for 2023. The company did not directly address whether changes to the iZEV program played a role.
PLANNING THE PRICE
Auto- makers are adjusting prices to account for incentives, but it’s “all but necessary” to meet the federal government’s “very, very ambitious” EV adoption goals.
But the automaker would be far from alone in taking cues from iZEV, Ilika said, with other brands undoubtedly looking to rebate eligibility cri-teria as a key factor in “where they’re going to land” on price. Qualifying for iZEV is based on MSRP, without delivery fees. As a result, starting prices for many battery-electric (BEV) or plug-in hybrid (PHEV) cars are clustered around $55,000, and numerous base-model zero-emission SUVs are priced just below $60,000.
Tesla’s two eligible vehicles are a case in point, with the entry-level Model 3 sedan priced at $54,990 and the base Model Y crossover at $59,990. Both base models and several of their higher-level trims also qualify for up to $5,000 from Ottawa.
But while there’s little doubt that automakers are playing to the government incentives, it’s all “fair game” and ultimately feeding into the federal goal of boosting EV adoption, Ilika said.
“Especially if we want to hit these very, very ambitious targets, it’s all but necessary.”
Claire Kim, senior manager of product pricing and strategic planning at Hyundai Canada, said the automaker’s pricing strategy has always prioritized consumers, and this hasn’t changed as the industry goes electric.
“All Hyundai pricing, including that of BEV/PHEV vehicles, are fully optimized for the current market and consumers,” she wrote in an email to Automotive News Canada. “This also includes making sure all our BEV/PHEV customers can utilize or benefit from the current government incentive structure.”
Hyundai “carefully” takes the iZEV rebate into account when pricing its EVs, Kim said, but she did not directly address whether the incentive caps ever prompt Hyundai to adjust prices up or down.
LUXURY, BUT LOWER
Kim: Hyundai takes govern- ment incentives into account when it prices vehicles so customers can benefit.
While Fiorani and Ilika agree that rebates are typically pushing EV prices higher in the mainstream market, the luxury segment provides a possible counterpoint.
The Mercedes-Benz EQB 250 compact crossover, which goes on sale this fall at $59,990 plus delivery fees, is expected to qualify for Ottawa’s incentive, though Transport Canada has yet to officially deem it eligible.
Bart Herring, vice-president of sales and product at Mercedes-Benz Canada, said the company considered the federal and provincial rebates when pricing the new model and expects the incentive-assisted price to help make the brand accessible to a wider range of customers.
“We’re seeing significant growth in our EV segment, and at this price point, we expect that to continue by putting more Mercedes-Benz EVs within reach of more Canadians,” he wrote in an email.
Herring did not address whether Mercedes-Benz would have priced the vehicle higher had the incentives not been available.
But Ilika speculates this could be the case for Mercedes-Benz and other luxury automakers such as Audi, BMW and Lexus, with vehicles priced at the cusp of qualifying for incentives. The lower pricing could be a longterm play, he said.
“For Mercedes, surely there’s an incentive on the brand’s end,” Ilika said. “These sorts of entry-level products, you can get people in, and then who knows what their next purchase is going to be. If they’ve been bitten by the Benz bug, I’m sure they’re going to think of Mercedes for their next vehicle, too.”
Fiorani, however, is more skeptical.
Having one model qualify for EV incentives “may get people in the door,” he said, but it’s unlikely to translate into many more sales, especially with the emphasis that luxury brands place on getting buyers into higher-cost models, he said.
“Manufacturers don’t want to have a base-model luxury car being their volume leader.”
