In February 2026, Prime Minister Mark Carney announced the government’s new automotive industry strategy, ending the manufacturing mandates that would’ve required 60 per cent of all new cars to be electric vehicles (EVs) by 2030. The same previous mandate also required 100 per cent of all new vehicles to be EVs by 2035.

Replacing those requirements with more stringent emissions standards for vehicles manufactured in 2027 through 2032, means less pressure on fuel retailers going forward, according to a Morningstar DBRS commentary published after the policy changes were announced.

They say Morningstar expects the changes will result in “manageable” pressure on Canadian fuel retailers in the near to medium term as EV sales rebound from lows recorded in 2025, thanks to the return of consumer incentive programs for buying EVs which had been paused since January 2025.

The incentive program, introduced in 2019, was popular. It was put on hold at the start of 2025 after the allocated funds were exhausted.

“Over the longer term, we believe that the end of the EV sales mandate provides fuel retailers and convenience stores with a less daunting long-term outlook now they no longer have a mandated transition to 100 per cent EV sales over the next decade hanging over their heads,” the Morningstar commentary states.

Entitled Canada’s New EV Policy: Near-Term Pressure, Positive Long-Term Sentiment for Fuel Retailers, the report continues, saying while these changes provide some relief for fuel retailers in the long-term, changing government policy presents an uncertain future for these companies.

“The shift to EVs has been slower than anticipated because of inconsistent government incentives, high purchase costs and insufficient charging infrastructure,” they write. “Federal incentive facilitated EV manufacturing, promoted affordability and sustained consumer interest.” 

That waning consumer interest following the exhaustion of the first round of government funding for EVs contributed to a sharp decline in the market for zero emission vehicles, including battery electric and plug-in hybrid vehicles. These made up just 8.9 per cent of the market through the third quarter of 2025, compared with 14.6 per cent in 2024.

“The impact is even more pronounced when looking at battery electric vehicles, which decreased 5.7 per cent of total registrations through Q3 2025 from 10.9 per cent in 2024. These trends highlight the correlation between government incentives and EV sales volumes and we expect EV sales in Canada will regain momentum with the reintroduced rebate program,” they write. “That said, even with some recovery, the EV penetration rate in Canada remains low and we believe the impact of new sales on fuel demand will be modest and manageable for established retailers in the near to medium term.” 

Morningstar concludes that the firm’s researchers remain skeptical whether there will ultimately be a hard transition to EVs in the next decade.

New vehicle sales in 2025: EV uptake declines 

In 2025 overall, new zero-emission vehicle (ZEV) registrations decreased by 34.7 per cent when compared with the previous year, according to Statistics Canada. They say these accounted for 9.5 per cent of all new registrations, down from 14.6 per cent in 2024.

At the provincial level, they say new registrations for ZEVs declined 48.7 per cent in Quebec, 25.5 per cent in Prince Edward Island, 21.2 per cent in British Columbia, 17.7 per cent in New Brunswick, 17.2 per cent in Ontario, 13 per cent in Nova Scotia and 6.9 per cent in Manitoba, following the pause of the EV rebate program.

In their place, new registrations for vans saw the most significant growth in 2025, increasing by 20.4 per cent. Although multipurpose vehicles continued to lead in total registrations, accounting for 63.2 per cent of all new registrations, these rose by just 1.2 per cent during the year while pickup truck registrations rose 0.9 per cent.

New registrations for hybrid electric vehicles rose 36.1 per cent in 2025; battery-electric vehicles and plug-in hybrid vehicle registrations, meanwhile, decreased by 42.1 per cent and 10 per cent respectively when compared to the previous year when rebates were available.