Federal officials considered telling car dealers as early as last September that Canada’s EV purchase incentive was winding down, an internal memo to the transport minister shows, raising questions as to why they instead waited until the program was nearly out of funds.

The Dec. 18, 2024 memo, which The Logic obtained through an access-to-information request, shows officials knew the program could run out of money as soon as early January. Yet they waited until Jan. 10 to warn dealerships, creating a two-day scramble for dealers to request reimbursement for vehicles they’d already sold or leased at discounted prices.

The delay resulted in a chaotic and inequitable end to the incentive, critics say. Immediately after the program’s end was announced on Jan. 10, a surge of applications—most from Tesla—drained the program before many other car dealerships could be reimbursed. Tesla alone depleted the fund by $43 million over a few days.

Huw Williams, director of public affairs for the Canadian Auto Dealers Association, said that if the decision had been made the previous September that many of the last-minute challenges could have been avoided. “I think even the officials would have to admit today that they waited too long,” he said.

The memo to then-minister Anita Anand also shows Transport Canada knew it was likely that manufacturers and dealerships would “create a surge of requests” when the program’s end was announced. The government did not comment to media, including The Logic, when asked in December whether the incentives would be renewed by the end of March. 

“As part of the wind-down of the program, Transport Canada prioritized communication with manufacturers and participating dealerships” to “reduce market disruption,” department spokesperson Flavio Nienow told The Logic last week in a statement.  

“These stakeholders, responsible for applying the incentives, required clarity to manage inventory and customer expectations. A broader public announcement was made at the time of the iZEV program pause.”

It turned out there wasn’t nearly enough money to last until the end of March. Transport Canada announced in a news release on Jan. 10 that the program would pause on schedule on March 31 “subject to funding availability.” The money was gone by Jan. 12, in large part due to Tesla’s rush to collect backlogged incentives for its vehicle sales.

“The message was that there would be an orderly wind down,” said Williams, adding that Tesla either panicked or somehow “knew that the situation was more urgent.” Tesla, which runs its own stores and is not part of the dealers’ association, did not respond to a media request.

Despite the program’s messy halt, there is pressure on the government to kickstart EV sales by renewing the incentive, which was known as iZEV, with many prospective buyers waiting for news about the program’s future. Battery-EV registrations plunged more than 39 per cent in the second quarter of this year.

Last week, Industry Minister Mélanie Joly told The Logic that the government remains committed to bringing back the subsidies and acknowledges that the gap in the subsidy program is partly to blame for lower EV sales. 

As regulators go back to the drawing board, though, Williams warned there is a structural issue with the program. His group originally pushed for a system in which consumers claim the incentives as rebates after purchasing their EVs. Instead, “at the behest of the government of Canada,” dealers agreed to one wherein they discounted the cars on the lots, and then applied to be reimbursed. 

“The government really felt strongly that the burden of advancing the financing should be on the dealer’s shoulders,” said Williams. “This was the nightmare scenario of dealers: being left hanging for billions of dollars. But the original design of the program, and not listening to our advice on that, really put us in the box that we’re in.” 

The government seemed alive to the hazard. The memo notes that “ensuring an orderly wind-down of this high-profile program is essential, particularly as it is delivered to consumers in partnership with dealerships.” 

Ultimately, a months-long investigation verified all of the claims filed between Jan. 10 and Jan. 12 and Ottawa agreed to pay out funds to the dealerships, including Tesla. The interim, though, was “a period of great concern” for dealerships, some of whom were at “substantial financial risk,” Williams said, since the dealerships were buying EVs at regular cost from manufacturers and selling them at discounts, on the promise the government would pay the difference.

The question now is how the government will ensure future programs don’t end in similar confusion. The memo had warned regulators that “​​manufacturers and dealerships have consistently asked Transport Canada to provide advance notice of the program’s pause,” adding that a three-month heads-up would likely draw complaints.  

Williams points to converging events around the time of the government’s announcement that made things more difficult. Smaller dealerships had less staff during the holidays, and on Dec. 17, 2024, Quebec announced it would pause its provincial EV incentives in Feb. 2025, prompting a wave of Quebec EV shoppers to buy vehicles all at once. During an already busy period, many dealerships did not anticipate they would have to catch up on all their recent paper work in a single weekend. 

Despite what he calls the “fiasco,” Williams was pleased that both Transport Minister Chrystia Freeland and her predecessor, Anita Anand, personally stepped in to help with iZEV’s strained wind-down. 

Laura Scaffidi, a spokesperson for Freeland’s office, told The Logic, “We are looking at ways to reintroduce a purchase incentive that supports Canadian workers, strengthens our domestic supply chains and reflects the times we are in.” 

With files from David Reevely in Ottawa