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American Focus > Blog > Economy > How Canada’s EV Mandate Could Put Dollars in Tesla’s Pocket
Economy

How Canada’s EV Mandate Could Put Dollars in Tesla’s Pocket

Last updated: September 29, 2025 6:29 pm
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How Canada’s EV Mandate Could Put Dollars in Tesla’s Pocket
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Tensions and Financial Opportunities: The Complex Relationship Between Canada and Tesla

  • Tension has existed between Canada and Tesla for several reasons.

  • Canadian automakers could face significant costs related to zero-emission credit purchases.

  • Tesla may be one, if not the only, automaker with the surplus credits available for sale.

  • These 10 stocks could mint the next wave of millionaires ›

The relationship between Canada and Tesla (NASDAQ: TSLA) is akin to frenemies navigating a complex landscape of business and politics. The friction can be traced back to allegations that Tesla manipulated Canada’s electric vehicle (EV) subsidy program. Although Tesla has maintained that this was a misunderstanding and was ultimately cleared of any wrongdoing, it did exacerbate political tensions, especially considering Elon Musk’s controversial support for the Trump administration, which has not sat well with many Canadians.

The development has turned somewhat ironic, as it now appears that the Canadian government may unwittingly enrich Tesla financially. Let’s explore the current situation.

Canadian automotive manufacturers are raising alarms about their future if the proposed electric vehicle mandate becomes enforceable as intended and if EV sales fail to experience significant growth. Canada’s EV sales mandate stipulates that automakers must ensure a certain percentage of the vehicles (including cars, SUVs, and light-duty trucks) sold are zero-emission vehicles, which include hybrids.

The mandate was initially set to start at 20% by 2026 but has now been adjusted to kick off in 2027, with a more stringent initial target of 27%. This target will progressively increase to 100% by 2035, meaning all new vehicle sales are intended to be EVs. To provide context, EV sales in Canada almost hit 15% of total sales in 2024, largely due to government incentives that offered consumer rebates of up to $5,000.

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However, following the cessation of these subsidy programs in January, EV sales experienced a sharp decline. Recent data from Statistics Canada highlighted that EVs accounted for merely 7.7% of all new vehicle sales as of July – a far cry from what is necessary to meet the impending regulations.

A Tesla Cybertruck.

Image source: Tesla.

As many investors are aware, automakers can comply with these regulations by purchasing zero-emission credits from companies that generate a surplus. Tesla, which solely offers EVs and has no gasoline models to offset, stands to profit by selling its credits to automakers that require them to balance their portfolios. This mechanism has historically played a crucial role in Tesla’s financial success.

The silver lining for Tesla is that Canadian automakers might find themselves in a position where they have no choice but to buy credits from them, despite previous tensions. As highlighted by Brian Kingston, president of the Canadian Vehicle Manufacturers’ Association, with 2026 model year compliance already on the radar, Tesla is likely to be the sole automaker with a surplus of credits to sell.

This rewritten article retains the original HTML structure while presenting a fresh narrative on the relationship between Canada and Tesla, addressing the tension and potential financial implications effectively.

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