Column: Tesla to profit from Canada's ZEV mandate, even as other federal policies punish it

Yahoo

9 hours ago

That Tesla is more in the business of generating government credits than building cars has been a running joke in automotive for years. It's also partly true, with compliance credits responsible for about 40 per cent of the company's profit in 2024.
And Tesla will soon have another source of compliance revenue, as the Canadian government implements regulations that mandate zero-emissions vehicles account for 20, 60 and 100 per cent of light-duty vehicle sales by 2026, 2030 and 2035, respectively.
Automakers falling short of these benchmarks must buy offset credits from competitors, or face penalties of $20,000 per vehicle.
With no internal-combustion engine vehicle sales to offset, Tesla generates — and sells — these credits in abundance. Globally in 2024, it reported US $2.8 billion in revenue from the sale of credits.
Sign up for Automotive News Canada's weekly podcast newsletter for a lively and in-depth discussion of the biggest stories.
The company does not break out details for Canada, but it is already selling credits in British Columbia and Quebec, which have provincial compliance regimes. The latest data available in Quebec shows Tesla sold nearly 32,000 credits to BMW, Honda, Mazda, Mercedes-Benz, Stellantis and Toyota between 2020 and 2024.
The going rate for a credit is not a matter of public record.
But as Ottawa tightens the ZEV screws, Tesla's market for credits is poised to expand across the country. Higher demand for credits will also make the trade more lucrative, at the expense of other automakers, and ultimately consumers who are forced to pick up the tab.
Buying credits from the U.S. electric-vehicle maker is far from ideal for other automakers, but for many, it's 'really the only option' to hit the ZEV targets, said David Adams, CEO of the Global Automakers of Canada, which represents import brands locally.
Brian Kingston, CEO of the Canadian Vehicle Manufactures' Association, which represents the Detroit Three, said it is 'nonsensical' that federal policy should push automakers toward buying credits from Tesla, a company that lacks a local assembly footprint and employs far fewer Canadians than other big brands.
'In what world would the Canadian government want to be lining the pockets of Elon Musk through a poorly designed regulatory structure?'
The Tesla CEO has been 'directly hostile' to Canada, Kingston added, a nod to Musk's piling onto U.S. President Donald Trump's rhetoric about Canada becoming the 51st state.
In contrast to digging in its heels on the ZEV mandate, Ottawa has reworked another key ZEV support policy in response to Musk's antagonism. In March, Minister of Transport Chrystia Freeland said Tesla will be ineligible for federal consumer incentives until 'illegitimate and illegal' U.S. tariffs are lifted.
Tesla was also booted from a series of provincial rebate programs this spring as blowback against Musk mounted.
Forging ahead with a regulation that will enrich Tesla while seeking to punish it financially with separate policy is self-defeating. And in the current climate, Ottawa doing anything to pad Tesla's margins is at best a bad look. At worst, it's a complete betrayal of the government's purported support for local autoworkers and its commitment to fight back against aggressive U.S. trade policy.