Canada Willing to ‘Align’ EV Tax Credits with U.S. to Avoid Dispute

Prime Minister Justin Trudeau on Monday said that Canada would be willing to “align” its electric vehicle (EV) incentives with the tax credits proposed under U.S. President Joe Biden’s Build Back Better Act, provided that its southern neighbor expands those credits to Canadian-built vehicles — reports CTV News.

President Biden’s bill proposes tax credits of up to $12,500 USD for EVs, but $4,500 of that total will only be available to vehicles assembled in the U.S. by a unionized workforce.

The caveat locks American automakers with non-unionized workforces like Tesla and neighboring countries Canada and Mexico, which the U.S. has partnered with on automotive manufacturing for several decades, out of the full value of the credits.

Last month, Trudeau said he was “a little bit concerned” about what the increased incentives could mean for the economic balance and trade agreement between the U.S., Canada, and Mexico. The proposal was also slammed by Tesla CEO Elon Musk at The Wall Street Journal‘s CEO Council Summit last week.

Deputy Prime Minister Chrystia Freeland and Trade Minister Mary Ng warned Congress last week of retaliatory tariffs and other punitive measures in the event that the proposed changes go into effect. The Build Back Better bill has already been passed by the House, and currently awaits Senate approval.

Freeland and Ng have also proposed finding a way to make Canadian-assembled vehicles and batteries eligible for the proposed incentives down south.

Trudeau’s comments have indicated a willingness to take it one step farther by matching Biden’s proposed rebates of up to $12,500 USD, and the Canadian package will likely apply to vehicles assembled in either country.

The news comes at a time when the federal government’s Incentives for Zero-Emission Vehicles (iZEV) program is getting a bit long in the tooth and could use some revamping. Right now, Canada’s iZEV program only applies to new EVs with an MSRP between $45,000 and $55,000 CAD.