Canada to Phase Out Incentives for Medium- and Heavy-Duty EVs

Businesses interested in acquiring medium and heavy-duty zero-emission vehicles (ZEVs) will soon have to make their purchases without the support of government tax incentives. The government of Canada announced today as part of its proposed budget that this and other programs will be phased out.

“[Transport Canada] will phase out, or reduce, selected programs,” the government wrote in Budget 2025. “This the includes Incentives for Medium- and Heavy-Duty Zero-Emission Vehicles programs, which will conclude at the end of 2025-26.”

These incentives could be worth up to a maximum of $1 million per calendar year to businesses buying or leasing electric commercial vans and trucks, for example. Earlier this year, General Motors announced that it would end production of its electric delivery van, the BrightDrop, in Ontario due to low demand.

The program was introduced alongside incentives for light-duty ZEVs (consumer vehicles), which effectively ended early this year, when the program’s funds were exhausted. Both programs aimed to help reduce greenhouse gas emissions in the transportation sector, which the second most carbon intensive part of the Canadian economy, behind the oil and gas sector.

Unfortunately, the government made no mention of restarting the incentive program for consumer vehicles either, in Budget 2025. The lack of investment in ZEVs comes despite earlier public comments from Ministers Mélanie Joly and Julie Dabrusin that the program would be reestablished under Prime Minister Carney’s government.

However, the Liberal Party’s recent commitment to green transportation came into question when it announced that it would reconsider Canada’s sales targets for ZEVs (that is to say, plug-in hybrid, electric, and hydrogen fuel cell vehicles). The government will officially announce its goals for lower-emission vehicles in the coming days.

Meanwhile, the government said its new budget will work to protect industries targeted by U.S. trade disruptions, including the automotive sector. These include counter tariffs, initiatives to reskill workers, and tax incentives for companies that produce goods in Canada.

The proposed budget will now be read, debated, and negotiated by the rest of parliament. As a minority government, the Liberal Party must win support from at least some members of parliament outside of its ranks in order to pass the budget. If it can’t, Canada could be in for another election before the year is out.