How Ottawa’s EV Strategy Is Faring as Honda Reportedly Pulls Back and Chinese EVs Come In

The electric vehicle (EV) sector has undergone dramatic shifts in recent years, marked by multibillion-dollar government investments, major manufacturing projects, and high-profile setbacks, as evolving policies in the United States and China continue to reshape global market dynamics.

One consequence of the turbulence in the sector came last week, as Japanese media Nikkei Asia reported on May 6 that Honda will cancel its $15 billion EV supply chain investment plan in Canada, consisting of four new manufacturing plants in Ontario.

The Japanese carmaker didn’t officially comment on the matter, a point Prime Minister Mark Carney highlighted when questioned by reporters. “We’re in discussions with them constantly, and look, there’s no announcement today, to be clear,” Carney said on May 6.

The federal and Ontario governments had hailed Honda’s 2024 announcement that it would build the new EV plants in Canada, a project backed by some $5 billion in combined federal and provincial support.

If the plan falls through, no taxpayer funds will be lost, given they would have come through tax credits or other incentives provided as the project advances.

Other failed EV ventures have come at a significant cost to taxpayers, including Quebec’s reported $270 million loss tied to the Northvolt battery plant project near Montreal. Meanwhile, Quebec and Ottawa stand to lose some $140 million and $50 million respectively in their failed investment in electric school bus manufacturer Lion Electric.

Things have changed since the days of major EV announcements, with a key reason being the return of U.S. President Donald Trump to the White House in 2025. Trump imposed tariffs on Canadian-made vehicles and rolled back federal support for EVs, citing the move as an effort to eliminate what he described as “unfair subsidies and other ill-conceived government-imposed market distortions that favor EVs over other technologies.”

This further reduced demand for EVs, adding pressure on Canadian EV manufacturers as their largest potential export market shows weakening appetite for their products.

Honda’s changing plans in Canada are reportedly linked to weak EV sales in the United States and a related plan to shift its North American strategy to focus on hybrid vehicles.

The move also comes as future tariff-free access to the United States is uncertain and as Chinese EVs are set to hit the Canadian market.

Chinese EVs

During his visit to Beijing in January, Carney reached an agreement with China to have the country temporarily reduce or suspend tariffs on certain Canadian agricultural and seafood exports. In exchange, an initial 49,000 Chinese EVs will be allowed to enter Canada at a discounted most-favoured-nation tariff rate of 6.1 percent instead of the 100 percent surtax that has applied to the vehicles since October 2024.

China expert Margaret McCuaig-Johnston says Ottawa’s new policy of allowing Chinese EVs into Canada played into Honda’s decision to pull back.

“It’s a terrible thing to lose Honda. So we lost a US$11 billion factory because of 49,000 Chinese EVs,” she told The Epoch Times in an interview.

Ottawa has defended the move, saying that the 49,000 Chinese EVs are a small chunk of the car market as a whole in Canada, whereas detractors say it’s a sizeable part of the specific EV segment. A total of 177,034 zero-emission vehicles, including battery EVs and plug-in hybrid EVs were sold in the country in the last calendar year of 2025, according to Statistics Canada.

“This is not worth it to lose a long-term investment for this short-term concession to China to get our canola farmers their market back,” McCuaig-Johnston said.

Chinese EVs and hybrid cars are parked at a lot in Toronto on May 4, 2026. Carlos Osorio/Reuters

Forced Labour

Beyond the risk of losing Honda, McCuaig-Johnston warned that concerns over the possible use of forced labour in China-made EVs destined for Canada could further strain Ottawa’s trade relations with Washington. The U.S. administration launched investigations into Canada and 59 other countries in March to determine whether they are effectively banning goods made through forced labour.

“We’re gonna fail this forced labour investigation,” she said, noting the repercussions could be a 25 percent tariff come July 1.

A primary concern about forced labour in the EV supply chain stems from the use of aluminum made through the exploitation of the minority Uyghurs from China’s Xinjiang region.

Industry Minister Mélanie Joly was asked specifically about this issue when she testified before the House industry committee on May 4. She said the issue of forced labour would be addressed through legislation and that the public safety minister and the Canada Border Services Agency (CBSA) “need to do their job.”

Canada has legislation to prevent the import of goods made from forced labour, but enforcement has been minimal, according to data from CBSA. From 2020 to late 2025, just 48 shipments were detained, and only two of them were ultimately prohibited.

Another six shipments detained containing auto parts were re-exported back to China in 2023 before a formal determination could be made in relation to their content. Over a similar timespan, the United States blocked entry to nearly 23,000 Chinese shipments.

Joly said her government’s approach to Chinese EVs is “very holistic” in protecting auto workers and supply chains “while bringing in really good technologies.”

“And at the same time, what we want is affordability,” she said.

Chinese police watch an electric vehicle being loaded on a ship destined for Thailand in Guangzhou, China, on Feb. 22, 2025. Pedro Pardo/AFP via Getty Images

North American EV Policy

The Trudeau government imposed a 100 percent surtax on Chinese-made EVs effective Oct. 1, 2024, following in the footsteps of the Biden administration. The Canadian government had expressed concerns at the time about “pervasive subsidization” and dumping of Chinese EVs, as well as “concerning labour practices” such as forced labour in Xinjiang.

Keeping Chinese EVs outside U.S. borders has been a rare point of agreement between Republicans and Democrats south of the border.

Two senators representing the states of Ohio and Michigan introduced a bipartisan bill in late April to ban Chinese EVs and their components from the U.S. market.

“Chinese cars are surveillance packages on wheels, with the ability to collect on American citizens and sensitive sites,” said Michigan Democratic Senator Elissa Slotkin in a statement. Slotkin, a former CIA officer, said the Chinese Communist Party’s strategy of subsidizing the sector to undersell the competition also puts at risk her state’s auto industry.

Slotkin told CBC News in recent days that while Canada-U.S. ties have seen better days, getting closer to China is risky. “We don’t like watching a decision to let Chinese vehicles into Canada,” she said.

EV Mandate

Aside from geopolitical issues impacting the Canadian EV market, there have been some notable domestic developments on the file since Carney became prime minister in March last year.

His first move in office was to set the consumer carbon tax rate to zero, effective April 1, 2025, which led to gasoline prices falling nearly 20 cents in some areas. High fuel prices tend to make EVs more attractive for consumers.

After removing this flagship policy from the previous Liberal government, while maintaining the carbon tax on the industry sector, Carney announced in February this year that he would replace the EV mandate, another key Trudeau-era policy.

As part of that announcement, Carney also indicated federal subsidies for the purchase of EVs were coming back after the previous rebate program was paused due to running out of money.

Meanwhile, the Conservatives have said the government should remove the industrial carbon tax as well and have criticized the government for industrial policies that they say subsidize American-made vehicles.

Carney said the EV mandate would be replaced by emissions standards, which he said would have roughly the same effect, with the goal to reach 75 percent EV sales by 2035, and 90 percent by 2040. The Trudeau mandate aimed to reach 100 percent EV sales by 2035.

The status of the EV mandate has been debated in recent days, with industry leaders saying it’s still in place and with Minister Joly saying it’s not.

“The mandate is still in force today, and it continues to create financial and legal compliance burdens for companies,” Brian Kingston, president and CEO of the Canadian Vehicle Manufacturers’ Association, told MPs of the industry committee on May 4. Kingston represents Ford, GM, Stellantis, and other carmakers in Canada.

Meanwhile, at the same committee meeting, Minister Joly said “there’s no EV mandates.”

David Adams, head of Global Automakers of Canada, agreed with Kingston in saying that the EV mandate remains in place.

Adams, who represents several foreign automakers including Toyota and Volkswagen, said that in an ideal scenario the EV mandate would be repealed. He argued that Ottawa should take the time needed to properly develop its emissions targets rather than proceed with what he described as a “rush consultation process, which is what it’s going to be at this point.”

He said reaching the target of 75 percent EV sales by 2035 through emissions regulations is “still a bit of a stretch.”

“We’re going to need to ensure that we have ongoing dialogue and review of these targets to make sure that they’re realistic and are reflective of how Canadians are adopting the technology,” he told The Epoch Times in an interview.

Environment Canada told The Epoch Times that the EV mandate will be replaced after new greenhouse gas emissions standards for light-duty vehicles are adopted. A department spokesperson said proposed amendments will be published this summer in the Canada Gazette, with final amendments to be released later this year.

“In doing so, Canada will rationalize emission reduction policies, focusing on the outcomes that matter to Canadians without placing undue burden on the Canadian industry,” spokesperson Eleni Armenakis said in a statement.

The key thing for automakers in Canada going forward, however, is to maintain preferential access to the U.S. market, Adams said, while adding that the Chinese EV deal is an irritant for the White House. Top U.S. officials have criticized Ottawa’s plan to bring in Chinese autos and allowing “Beijing a foothold in the North American auto market.”

Adams and other industry stakeholders say the higher price of oil due to the Iran war combined with Canada’s new auto strategy with its rebates has pushed EV sales up in recent months. Quoting internal data, Adams said EV sales were up 30 percent year-over-year in April.

Joanna Kyriazis, director of policy and strategy at the think tank Clean Energy Canada, also noted how automakers have adjusted their prices to fall below the $50,000 threshold granting consumers access to the federal rebate. She said the car companies are also getting ready for the arrival of lower-cost Chinese EVs, saying “sticker prices have come down significantly.”

Cara Clairman, an EV advocate who heads the non-profit Plug’n Drive Canada, told The Epoch Times in an interview that increased EV adoption is “good news” while noting how prospects for increased manufacturing in Canada have decreased with carmakers scaling back.

“The market is kind of what it is and the car companies make independent decisions,” she said. “There’s very little policy that we can do on our side that I think will change what’s happening right now.”

Pierre-Olivier Pineau, a management professor at HEC Montréal, said that scaling up domestic EV production to meet Ottawa’s targets would be a “very difficult” path given the size of the market. He added that it would likely require encouraging or mandating the adoption of specific vehicle models across Canada.

“That would mean a state-intervention that is beyond what we’ve used in recent history,” he told The Epoch Times in an email.

Pineau instead recommends capping the number of cars sold in Canada to increase the ratio of EVs sold, in addition to promoting public transportation.

Pineau said he doesn’t favour the current path of importing more EVs, including from China, noting its impact on the local car industry and on the relationship with the United States.