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Canada Fights Back Against U.S. EV Incentives

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  Published in Automotive and Transportation on Saturday, January 17th 2026 at 15:26 GMT by The Globe and Mail

The Challenge: The IRA's Lure

Since its inception, the U.S. IRA has proven to be a powerful magnet for automotive investment. Offering significant tax credits to buyers of American-made EVs, the IRA has incentivized automakers to prioritize production in the United States, potentially at the expense of Canadian operations. Companies like Toyota, Stellantis, and Honda, all of whom have established manufacturing facilities in Canada, have largely channeled their EV investment south of the border.

Canada's government recognized this looming threat and established a Canadian Automotive Policy Task Force last year. This task force, anticipating the negative impact of the IRA on Canada's competitiveness and potential job losses, recommended more forceful measures to protect the nation's automotive industry - a sector which has historically been a significant employer and driver of the Canadian economy.

The ACT Incentive: A Canadian Response

The ACT incentive directly addresses this challenge. Unlike broader investment programs, the new scheme is specifically targeted at foreign automakers already operating in Canada. To be eligible, companies must maintain a significant manufacturing presence within the country. The program doesn't offer blanket subsidies; instead, the size of the tax credit will be tailored to the specific vehicles produced, factoring in elements like battery capacity and overall technological advancement. This nuanced approach aims to reward innovation and targeted investment.

Minister of Industry Francois-Philippe Champagne underscored the government's commitment to Canadian auto workers and to establishing Canada as a leader in EV production. The program is intended not just as a reactive measure but as a proactive investment in the future of Canadian manufacturing and technological innovation.

Negotiating the Future of Automotive Manufacturing

The ACT incentive isn't just a standalone program; it's a key component in ongoing negotiations with major automakers. The Canadian government is actively working to secure a larger share of the global EV market, recognizing the strategic importance of this rapidly evolving sector. The incentive provides a powerful tool in these discussions, creating a more compelling case for Canadian investment over alternative locations.

While the specific details of the program and the potential financial impact remain to be fully unveiled, the message from Ottawa is clear: Canada is committed to defending its automotive industry and fostering a thriving EV ecosystem within its borders. The program aims to provide a competitive advantage, encouraging existing automakers to deepen their investment in Canada and potentially attracting new players to the market. The success of the ACT incentive will be crucial in determining whether Canada can retain its position as a key player in the global automotive landscape as the industry undergoes its transformative shift to electric mobility. The government's commitment signals a proactive strategy to avoid a brain drain and maintain the substantial employment linked to the automotive industry.