Success of new federal auto strategy lies in the details: industry insiders

TORONTO — The federal government has outlined key measures it plans to use to protect Canadian automotive manufacturing, but industry insiders say success will depend on the details.

Speaking at a Martinrea International Inc. plant in Vaughan, Ont., Prime Minister Mark Carney said the automotive strategy includes boosting investment and consumer demand, adjusting emission-reduction plans, improving trade policies and protecting autoworkers.

Some of the biggest moves included dropping the electric vehicle sales mandate that automakers had heavily criticized, and restarting an electric vehicle rebate program.

Plans also include increased funding support for industry, revamping its tariff program on the sector, and reducing taxes.

“We have everything we need to take the lead in the vehicles of tomorrow, and we’re positioning Canadian workers and businesses to seize that opportunity,” said Carney.

On the spending front, the government plans to dedicate up to $3 billion from the Strategic Response Fund, and $100 million from the Regional Tariff Response Initiative, to support investment in auto manufacturing. Funding is meant to address immediate challenges like electrification, automation, and connected technology while setting up for longer-term production.

On trade, Carney said the government will launch consultations on how to strengthen an existing remission program that rewards automakers who maintain their Canadian production footprint through lower tariffs on vehicles coming in from the United States.

The plan is to expand the program into a tradable system that will give credits to those who produce and invest in Canada, and require those that don’t to buy those credits to avoid tariffs, he said.

“Our strategy is to establish a comprehensive trade regime that strengthens the global competitiveness of our auto sector,” said Carney.

The expanded program could factor in Canadian content in vehicles, encourage new investment, maintaining unionized jobs and production of EVs as ways to reward and incentivize companies.

Carney also touted tax measures announced in its last budget that he says will make the country’s lowest marginal effective tax rate 4.5 percentage points below the United States.

The government is also providing $570 million for targeted training, upskilling and employment supports for workers.

The measures on electric vehicles were welcomed by groups representing automakers, but there wasn’t a clear endorsement that the policies would help manufacturing.

“We respect the government’s efforts to both sustain and encourage automotive investment in Canada, however, with all such announcements, the details matter,” said David Adams, head of Global Automakers of Canada, which represents Toyota, Honda and numerous other international automakers.

“The consultation, timing, and ultimate implementation of the initiatives announced today will be critical.”

Brian Kingston, who leads the Canadian Vehicle Manufacturers’ Association representing the Detroit Three, was also cautious on the tariff plans.

“Forthcoming changes to the remissions program will require careful review and consultation as the top priority for the automotive industry is the removal of U.S. tariffs and the renewal of CUSMA,” he said in a statement.

The effort drew some support from Unifor, which represents workers at GM, Stellantis and Ford.

“This is a good foundation, but a lot of action is going to be needed, and there are some parts that are critically important that are not fully worked out yet,” said Unifor national president Lana Payne.

She said strengthening the remission program to cover all automakers is key to defending Canadian manufacturing.

“This only works if we have, as a principle, that if you’re going to sell cars in Canada, you must build in Canada. That ultimately is how we protect production.”

She said it was important to talk to stakeholders to avoid unintended consequences, but that she’d also be pushing to get this done in a way that makes sense as quickly as possible.

TD senior economist Francis Fong said in a note that many of the actions are “simply lesser continuations of what would have been in place under former prime minister Trudeau,” noting the less generous rebate program and the mostly rebranded tax help.

“For the auto industry, much will depend on how other countries respond to Carney’s invitation to collaborate more deeply and how foreign multinationals respond to Canada’s investment support regime.”

Many details still need to be worked out, but cost implications of the remission program will be a key consideration, said Dave Power, KPMG Canada’s automotive lead.

“There will be a balance there for manufacturers, about the benefit of that versus the potential downside, of either having to incur costs to open up here or to move from another jurisdiction, given the size of the Canadian market.”

Measures forcing a decision of either investments or buying access can lead to higher costs for consumers as well so it needs to be approached thoughtfully, he said.

Much depends on what happens with the trade talks slated for later this year, with the Canadian investment picture making less sense without access to the U.S., he said.

But he said that KPMG survey data shows 72 per cent of consumers say that it matters if their car is built or assembled in Canada, so there are wider reasons to invest.

“Certainly from a consumer perspective, there’s an advantage to continuing to produce vehicles in Canada.”

This report by The Canadian Press was first published Feb. 5, 2026.

Ian Bickis, The Canadian Press