Requiring automakers to make electric vehicles will give us the budget models we need

This year, Canada passed a significant environmental milestone that is often pointed to as a key tipping point in the fight against climate change. The sticker prices of the best-selling and most common electric vehicles—like the Tesla Model 3, Hyundai Kona, and Chevy Bolt—are now all cheaper than the price of the average new gasoline car. Nate Wallace. Handout photograph This long sought-after turning point happened without much fanfare. There is a likely reason why. Rather than electric vehicles getting much cheaper, it is the price of gasoline cars shooting up that has brought us here. For Canadians struggling with the rising cost of living, celebrating this might seem in poor taste. The average price of a new vehicle in Canada has risen from $39,000 in 2019 to nearly $68,000 this year. That price is so high that now 46 of the 113 EV models available for sale in Canada have sticker prices below that amount, including the best-selling Tesla Model 3, which begins at $54,000 before applying federal and provincial purchase discounts. The second-hand car market used to offer some relief. Unfortunately, here too, the median price of a used vehicle has more than doubled over the same period, going from just under $19,000 to $39,000. Why did this happen? There was a shortage of a small computer chip called semiconductors. This supply crunch meant that automakers put the limited amount of the chips they did have towards their most profitable and expensive vehicle models, sport-utility vehicles, and trucks. Meanwhile, they cut production for less profitable, fuel-efficient, affordable sedan models and zero-emission vehicles. One study conducted for Transport Canada found that in March 2022, 82 per cent of dealerships across Canada did not have any electric vehicles in stock. As the supply of new vehicles fell, prices and profits skyrocketed. Economists used it as a textbook example of ‘greedflation,’ while industry analysts called it the great shift from ‘volumes to value’. This growth in the sales of fuel inefficient cars also put our climate goals further out of reach. Canada’s vehicle fleet continues to wear the crown of having the highest average fuel consumption in the world. So despite reaching this price milestone, we haven’t made much progress. Automakers will continue to prefer selling expensive gas guzzlers and keep electric vehicles to a niche luxury market because that is what is best for their bottom lines. The solution is to require automakers to shift to making electric vehicles instead. Some 74 per cent of Canadians agree that vehicle manufacturers have a responsibility to increase zero-emission vehicle production, and shift away from producing gasoline-powered vehicles even if it has a negative impact on their profits. This would not only make more electric vehicles available to buy, including in the discounted used vehicle market, but it will also make sure that Canadians get access to the budget models we need to make the transition accessible, instead of those models only being available overseas. European Union regulators have mandated the phase-out of combustion engine vehicle sales by 2035. This has sent a powerful market signal to automakers that if they plan on staying in business past 2035, they better start making electric vehicles (EVs), and better start making ones that can actually sell to a mass market. Automaker Stellantis now plans on introducing a budget 23,300-euro (C$34,000) Citroën EV in 2024. Volkswagen have also unveiled a budget EV model, the ID.2–set to hit roads in 2025 with a target price below 25,000 euros (C$36,600). A similar story is playing out in the United States where General Motors initially planned to cancel production of its most affordable EV model, the Chevy Bolt, but reversed the decision following aggressive tailpipe greenhouse gas reduction targets being proposed by the U.S. Environmental Protection Agency. Expert research indicates that Canada’s similar and soon-to-be finalized Zero-Emission Vehicle Sales Regulation can lower the price of a median zero-emission vehicle by approximately 20 per cent below the current baseline price trajectory by changing the profit-maximizing calculus of automakers, encouraging greater investment in cost-cutting R&D, and bringing more affordable models to the Canadian market at higher production volumes. At a time when Canadians are reeling from the devastating from this past summer's wildfires, and the ongoing cost-of-living squeeze, a regulation that will cut carbon pollution by 430 million tonnes and reduce the price of electric cars at the same time seems like a no-brainer. Nate Wallace is the clean transportation program manager at Environmental Defence. The Hill Times