Prime Minister Carney Unveils Canada’s New Automotive Strategy to Protect Jobs and Position Our Country as a Global Leader in Next-Generation Vehicle Manufacturing
February 5, 2026
Backgrounder
Canada is, and will remain, a nation that builds cars. For over 100 years, the automotive industry has been a cornerstone of our economy, underpinning advanced manufacturing, driving innovation and supporting hundreds of thousands of well‑paying jobs across the country. Backed by a world-class workforce, globally recognized parts suppliers and leading‑edge research and development, Canada’s automotive sector is building the vehicles of today and it will help build the vehicles of tomorrow.
Recognizing that the future of the automotive industry is electrified and connected, the Government of Canada is prioritizing the development of the full value chain for next‑generation vehicles. Through a series of deliberate and strategic investments, Canada is positioning itself as a global leader in vehicle electrification, autonomous and self-driving technologies, and the battery supply chains that will power the future of mobility.
- Clean electricity and energy infrastructure will power our economy as more Canadians choose electric, including electric vehicles (EV). Commitments made through Budget 2025 and the Major Projects Office will serve as the foundation for a national electricity strategy. Working closely with provinces and territories, we will ensure Canada has the clean and affordable energy needed to develop, manufacture and drive the cars of the future.
- We are strengthening Canada’s position in the world’s most important supply chains by investing in critical minerals—from mining to processing to commercialization—including the materials needed to make batteries here at home.
- We are backing this work with tax measures that help manufacturers invest and expand in Canada, including accelerated capital cost allowances through Budget 2025’s Productivity Super‑Deduction, investment tax credits for clean technology and EV manufacturing, and lower corporate tax rates for zero‑emission technology manufacturers. With the Productivity Super-Deduction, Canada now has the lowest marginal effective tax rate on investment of all G7 countries, now 4.5 percentage points below the United States (U.S.) and the furthest below the Organisation for Economic Co-operation and Development average.
- And we are investing in the technologies that will define mobility and the next industrial revolution—artificial intelligence (AI) and robotics. These tools are transforming advanced manufacturing and mobility. Canada is ready to lead. With our talent, our research strengths and our innovation ecosystem, we can develop the connected and autonomous technologies that will shape transportation—and ultimately enable safe, self‑driving vehicles.
These investments are a coordinated plan to build a stronger, more competitive Canada. Ideally, we will continue to advance this vision within an integrated North American automotive industry.
The Government of Canada’s recognizes a simple truth: the North American auto industry succeeds when our integrated supply chains are strong and when we compete together globally. Canada and the U.S. have built this integrated industry together over decades, and we are stronger together. Canada enters the Canada–United States–Mexico Agreement (CUSMA) review with this objective at heart.
Canada’s automotive sector is built on nation-to-nation collaboration. Canada has maintained a long and successful history of partnership with the U.S. and Mexico, as well as with Japan, to establish its automotive manufacturing footprint. More recently, Canada developed new partnerships with companies from Europe and the Republic of South Korea to build out a battery supply chain.
Canada is well positioned to attract new investments and diversify export markets by leveraging its free trade agreements that span 51 countries and provide access to more than 1.5 billion consumers. Priority will be given to attracting new entrants that are leaders in EV manufacturing and connected vehicle technologies to strengthen the sector’s resilience.
Canada will also be ensuring its regulatory frameworks—including vehicle safety regulations that encompass connected vehicle technologies—have been modernized to facilitate the entry of new vehicles and new investment.
Canada recently deepened its strategic partnership with the Republic of Korea by signing a memorandum of understanding (MOU) to strengthen Canada–Korea industrial collaboration for future mobility. This builds on other MOUs that Canada has signed with global automakers to promote cooperation.
Canada has also agreed to a new strategic partnership with China, a global leader in EV manufacturing, to further diversify trade and catalyze new investment in the automotive sector. The recently announced partnership will look to drive new Chinese joint venture investment in Canada and allow for a fixed volume of Chinese EV imports into the Canadian market.
Make no mistake—the Government of Canada will always stand up for Canada’s interests. Our strategy is about securing and growing the industry that supports 500,000 Canadian jobs, while positioning our businesses and workers to compete, innovate and export in a world where the future of autos is electric, connected and globally diversified. This is how Canada will develop, build and sell the cars of the future.
To achieve this vision, the government will do the following:
Accelerate investment in Canada’s auto manufacturing industry
Support major industrial investment in auto manufacturing and technologies
The Government of Canada will support major industrial investment through fiscal and other policy levers, including dedicating up to $3 billion from the Strategic Response Fund (SRF) and up to $100 million from the Regional Tariff Response Initiative to support investment in automotive manufacturing, including assembly and parts production. In line with the Buy Canadian Policy, the government will look to leverage these investments to maximize opportunities for Canadian suppliers and Canadian-made goods and services, including steel and aluminum.
To set the sector up for long-term success, this funding will help address immediate challenges facing the sector—including electrification, automation and connected technologies—while positioning Canada as a place where the vehicles of the future are built. Priority will also be given to diversification efforts, including new opportunities brought by Canada’s Defense Industrial Strategy, to make the industry and its supply chain more resilient and leverage our existing trade agreements with the world.
The Government of Canada will also support the sector through a series of available fiscal measures:
- The Productivity Super-Deduction, an accelerated capital cost allowance measure that allows automotive manufacturers to write off a larger share of the cost of investments in the first year.
- The Clean Technology Manufacturing Investment Tax Credit, a refundable tax credit that will continue to incentivize large-scale investments by reducing the costs of new machinery and equipment used to manufacture or process key clean technologies, including EV and battery manufacturing.
- Tax incentives and funding to support critical mineral mining and production, including the Critical Mineral Exploration Tax Credit, the First and Last Mile Fund and the $2 billion Critical Minerals Investment Fund, which will accelerate Canada’s sovereign interests as a global leader in critical minerals.
- Canada’s national AI strategy, which has already invested over $2 billion to date in the talent, compute infrastructure, and research and development that has set Canada apart as a global leader in AI. Auto companies are increasingly recognizing the depth of talent and innovation that is the result of decades of investment in Canada’s AI ecosystem. Canada’s forthcoming AI strategy will double down on this leadership position, driving AI commercialization and adoption across the industrial economy, including in the connected and autonomous technologies shaping the automotive industry.
Rationalize emission reductions policies to focus on outcomes that matter to Canadians
The Government of Canada will set a sovereign path to reduce emissions from light-duty vehicles (LDVs), setting the course for the intention of more than doubling the stringency of Canada’s greenhouse gas (GHG) emissions standards by 2035. This is expected to drive a 75% EV adoption rate, while providing flexibility in the technologies used to achieve these emission reductions. Canada will leverage new investments in EV production, consumer incentives and charging infrastructure, and will not stop there; it will also pursue the aspirational goal of achieving a 90% EV adoption rate by 2040.
The Government of Canada will repeal the Electric Vehicle Availability Standard (EVAS). 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. In light of rapidly evolving technologies, Canada will review these standards after five years to ensure they remain ambitious and aligned with Canada’s overall climate objectives.
The transportation sector, and specifically on-road LDVs, represent a significant portion of GHG and air pollutant emissions in Canada. As a result of increasingly stringent GHG standards, the efficiency of new model-year LDVs has improved significantly since the early 2010s and contributed to a decline in emissions and improvements in fuel efficiency. More stringent Canadian GHG emission standards for model years 2027 to 2032 will be introduced to drive emission reductions in a technology-neutral manner while increasing the number of zero-emission vehicles on the road.
Companies will be able to use a wide array of technologies to meet the standards in the early years and meet consumer preferences. However, a larger percentage of EVs will be required by all companies to meet the standard over time.
Strengthen domestic demand by making EVs more affordable and reliable for Canadians
Launch a new EV affordability program to help Canadians make the switch to EVs
Affordability remains one of the top barriers to EV adoption. Federal purchase incentives, alongside regulations and provincial and territorial measures, have a proven track record of driving EV adoption, having helped Canada reach a 15.4% market share in 2024, up from 3.1% in 2019.
The Government of Canada will launch a new, targeted five‑year EV affordability program to accelerate EV adoption by offering incentives to consumers and businesses for the purchase or lease of eligible cars with a final transaction value up to $50,000. To support the Canadian automotive industry, the transaction value eligibility cap will not apply to Canadian-made EVs.
Incentives will be up to $5,000 for battery electric and fuel‑cell electric vehicles, and up to $2,500 for plug‑in hybrid electric vehicles (PHEV), and they will decline over time as per the table below. Eligible EVs and PHEVs will be manufactured in Canada or imported from countries where Canada has a free trade agreement. It is projected that over 840,000 new EVs would be incentivized through the program. Canadians could start benefiting from this new program as of February 16, 2026.
| Item | 2026 | 2027 | 2028 | 2029 | 2030 |
|---|---|---|---|---|---|
| Battery electric and fuel-cell electric vehicles | $5,000 | $4,000 | $3,000 | $3,000 | $2,000 |
| Plug-in hybrid vehicles | $2,500 | $2,000 | $1,500 | $1,500 | $1,000 |
Develop a national charging infrastructure strategy
Next to affordability, range anxiety and inadequate charging infrastructure are top barriers to EV adoption. A reliable charging network, and the increased confidence of potential EV buyers that comes with it, will facilitate EV adoption.
Over the past ten years, the federal government has provided support to de-risk private investment in EV charging infrastructure, contributing to nearly 60,000 public and private chargers.
The government has also made significant investments to enhance the electricity grid and secure Canada’s energy future, ensuring a reliable and affordable energy supply that will support the electrification of transportation. In the coming weeks, the government will announce an ambitious electricity strategy. Working closely with provinces and territories, we will ensure Canada has the clean and affordable energy needed to develop, manufacture, and drive the cars of the future.
The government will develop a new national charging infrastructure strategy, which will focus on better attracting private equity, reducing barriers, making buildings EV-ready and ensuring skills training. The strategy will include a $1.5 billion envelope at the Canada Infrastructure Bank and will seek to identify private sector champions to lead projects of national significance, building out charging infrastructure more quickly across the country.
Establish a comprehensive trade regime to drive the competitiveness of the auto sector
Strengthen Canada’s automotive remission framework
Our plan will incentivize production and investment in Canada by strengthening Canada’s automotive duty remission framework to better align trade policy with Canada’s industrial and workforce objectives. The existing remission framework enables companies that are manufacturing vehicles in Canada to import a defined volume of vehicles from the U.S. without being subject to Canada’s countermeasures, provided they maintain their forecasted production levels in Canada. The remissions are designed to encourage companies to maintain their manufacturing base in Canada, but they do not reward higher levels of production.
The government will launch public consultations on how the remission framework can be leveraged more strategically to reinforce domestic production, attract new investment and enhance the long‑term competitiveness of Canada’s automotive sector. These consultations will focus on ensuring the framework supports tangible outcomes for Canadians—namely sustained production, good jobs, and a resilient, future‑oriented supply chain—while maintaining flexibility and competitiveness within an integrated North American market.
As a point of departure for consultations, the government proposes to introduce a tradeable import credit system. Such a system would differ from the existing remission framework by enabling vehicle manufacturers to earn import credits through production and investment in Canada. Companies with a surplus of credits would be able to sell them to those seeking to import vehicles to Canada, effectively monetizing their investments in Canadian production.
Importantly, the framework could also recognize broader objectives, including the use of Canadian content, the creation and maintenance of high‑quality unionized jobs, and the production of electrified vehicles. Together, these measures would ensure the remission framework operates as a targeted, performance‑based tool—protecting Canadian workers and communities, strengthening supply chains and positioning Canada as a destination of choice for automotive investment in a rapidly evolving global industry.
Consultations will also provide an opportunity to seek views on ways to use and design the remission framework to recognize broader policy objectives, including:
- rewarding the use of Canadian content in Canadian-made vehicles
- encouraging investment, particularly for emerging technologies such as electrified and advanced vehicle production
- recognizing the production of core parts in Canada, such as engines, transmissions and batteries
- creating and maintaining high‑quality unionized jobs
- producing electrified vehicles
Ultimately, Canada’s intent is to ensure the remission framework operates as a targeted, performance‑based tool—protecting Canadian workers and communities, strengthening supply chains and positioning Canada as a destination of choice for automotive investment in a rapidly evolving global industry.
Protect Canadian auto workers and businesses from immediate pressures and bridge them to the future
Support and strengthen the automotive workforce
Our strategy will strengthen the workforce through a new workforce alliance on advanced manufacturing—bringing together industry, labour and training institutions to tackle urgent labour market challenges in advanced manufacturing—including in the automotive sector.
These actions build on measures already deployed to prevent layoffs by expanding access to the Work-Sharing Program, including the recently announced investment of over $100 million over two years to support Work-Sharing employers in providing income top-ups to their employees on training and working reduced hours; this new investment is expected to benefit up to 26,000 Canadians, including auto sector workers.
Updated employment insurance (EI) flexibilities are also supporting workers and employers impacted by tariffs, including by providing an extra 20 weeks of EI regular benefits to long-tenured workers (48% of auto workers are long‑tenured).
We are also investing in Canadian workers through labour agreements with provinces and territories that enable targeted training, upskilling and employment supports to workers in key sectors, including the automotive sector. The Government of Canada has provided an additional $570 million over three years over and above the $2.9 billion annual investment in these agreements.
Canada’s new Defence Industrial Strategy, to be released shortly, will complement these efforts. As Canada looks to grow its manufacturing strength across the industrial economy, the skills and talents of the Canadian workforce will prove central to our overall success.
Establish an automotive task force
On January 26, 2026, the Government of Canada announced it will establish a new automotive task force with key automotive stakeholders to facilitate coordinated action between the federal and Ontario governments and support the long-term competitiveness of Canada’s automotive sector.
In consultation with industry, the task force will examine critical issues facing the industry, such as the future of vehicle manufacturing, investment, workforce protection and electrification, as well as future strategic investments. The task force will also support the alignment of federal and provincial efforts on trade-related issues, including the forthcoming CUSMA review.
This approach will facilitate coordinated action between federal and provincial governments to ensure the growth and prosperity of the sector and support the implementation of the automotive strategy.
Maintain counter tariffs on vehicles imported from the U.S.
Faced with tariffs imposed by the U.S. on Canada’s automotive sector, Canada has matched U.S. tariffs to protect Canadian workers and industry, including:
- a 25% tariff on fully assembled light vehicles imported into Canada from the U.S. that are not compliant with the CUSMA
- a 25% tariff on non-Canadian and non-Mexican content of CUSMA-compliant fully assembled light vehicles imported into Canada from the U.S.
Canadian–Mexican automotive trade continues to be tariff-free, consistent with CUSMA.
Canada will maintain these counter tariffs for as long as necessary to protect Canadian automotive manufacturing and workers from unjustified U.S. tariffs. Canada’s objectives in the CUSMA review will be the removal of these tariffs between Canada and the U.S., as this is consistent with building the strongest North American auto sector.