Leonard Waverman was the dean of the DeGroote School of Business at McMaster University and the Haskayne School of Business at the University of Calgary. He is a former director of BNP Paribas Canada and the C.D. Howe Institute.
The federal Liberal government has mandated that in 2035, 12 years from now, no internal combustion engine cars and light trucks (ICLTs) can be sold in Canada. This ban is to take place gradually, beginning at 20 per cent of vehicles sold in 2026 having to be electric, just over two years from now.
But in 2021, only 66,800 fully electric vehicles were sold in Canada, a tiny 4 per cent of the total. And, according to Statistics Canada, the number of electric vehicle sales has stalled in 2023, both here and in the United States. Ford is postponing US$12-billion in EV production facilities. Volkswagen has stopped production of two of its EVs. Tesla Inc. TSLA-Q keeps slashing its sales prices to move inventory. General Motors is delaying producing EV trucks in its Michigan plant by a year.
Any new technology can start off quickly because there are early adopters, those people who rush to buy something new such as an electric vehicle. These early adopters, however, are not generally representative of the population at large.
Many technologies have risen quickly but then stalled or fallen – for example, virtual reality headsets were a big hit two years ago. Who hears of them now? Several observers mistake these first sales as the beginnings of long-term adoption, but it’s not necessarily so.
Many new technologies come to the market to fill an unmet need – VR headsets, washing machines, fax machines, cellphones for example. While EVs do satiate an abstract desire on the part of the environmentally conscious consumer, they do not meet any tangible unfilled need; they take you from A to B as do existing ICLTs.
That’s why these mandates will not work – EVs need to supplant existing uses, and currently they do not, despite all their technological advances.
In fact, EVs are expensive and troublesome. The early EV adopters seemed to care less about the price of EVs (averaging $82,000 in Canada before government rebates) and the lack of a charging infrastructure than the average potential EV purchaser.
When you purchase a vehicle with an internal combustion engine, you don’t worry whether there will be a nearby station where you can get the gasoline to recharge your fuel tank. But the lack of a cohesive plan to install fast EV chargers in many locations prevents more vehicle sales.
Also, there is no standard port for charging stations, and there is a fight between Tesla Inc., Ford and GM versus a group of other manufacturers to establish that port standard. Until this gets sorted out (Tesla Inc. is winning), and charging stations become more ubiquitous, EV sales will stagnate.
Moreover, EVs are new, having been on the market for only a few years. We don’t see a lot of stories as yet of individuals being charged between $5,000 and $15,000 to replace their electric vehicle battery bank.
Sure, it is now cheaper to run electric vehicles than standard internal combustion vehicles. But that hardly makes up for all their shortcomings. As well, if and when the world has fewer standard vehicles and more electric vehicles, the latter will become more costly to operate than now. That’s because the current road tax which is baked into the price of gasoline will somehow have to be shifted to electric vehicles. Electric vehicles cause the same damage to roads as do standard vehicles and therefore they will have to pay for road repairs and damage.
I predict that if the government sticks with this mandate, EV sales won’t rise quickly. The government should try a different strategy.
The government can start by ensuring there is a standard for charging stations and by helping to fund a nationwide system of charging stations, removing a significant barrier to the adoption of electric vehicles. The government also needs to come clean (so to speak) about the need to move taxation for road repair to electric vehicles. As well, the government needs to start working with EV manufacturers to come up with a strategy for dealing with the potential stockpile of very large used rechargeable batteries and estimate the impact of large-scale EV adoption on the electricity grid.
I may own an EV myself one day. They are marvels of innovation and repair costs for an electric motor are tiny fractions of the repair costs for an internal combustion engine. But a simple stark mandate to end sales of ICLVs in 12 years is not a strategy, it’s an empty hope.
Editor’s note: A previous version of this article understated the percentage of electric vehicles sold in 2021. This version has been updated.