How the 2023 Canadian Federal Budget Regarding Clean Energy Concerns Dealers

On March 28, 2023, the Honourable Chrystia Freeland, Deputy Prime Minister and Minister of Finance, tabled the federal budget, which included several measures of importance to the Canadian auto care sector. One of these measures was prioritizing electric vehicles and batteries in an effort toward a clean economy.

To recap, in late 2021, the Government of Canada set a directive to cut pollution from all sectors of the economy, including the transportation sector, which accounts for one-quarter of Canada’s greenhouse gas emissions. Part of this directive was a mandate that all light-duty cars and passenger truck sales would be zero-emission by 2035. So it’s no surprise that part of this year’s budget included subsidies toward green energy.

It’s great that we are moving toward a cleaner planet, but as a Dealer, you might be asking yourself; 

• What does this mean for me? 
• What kind of support is the government planning on giving to automakers and Dealers to help us transition toward total zero-emission new vehicle sales? 

In 2021, the government reduced corporate income tax rates for zero-emission technology manufacturers. These rates—4.5 percent for small businesses and 7.5 percent for other companies—are scheduled to expire in 2032, subject to a phase-out starting in 2029. Budget 2023 proposes extending these reduced rates availabilities by another three years, taking us to 2032, meaning that the reduced tax rates will no longer be in effect for taxation years starting after 2034. 

Extending this support is critical for automakers to ensure they have the ability to keep innovating and making zero-emission technologies. Sounds good, but according to Canadian Auto Dealer, it plans to lobby the government for additional items that were not included or clarified in this year’s budget. CADA said the budget “was a missed opportunity to present a coordinated strategy to generate economic growth and address the rising costs for businesses.”

“As a top-line, this budget was a choice between fiscal responsibility and economic growth while placating the NDP social agenda,” said CADA in its update. “As a result, Budget 2023 has [a] higher, longer-term deficit and debt, higher taxes, higher spending, and higher subsidies to ‘green’ energy and some Canadians.” 

CADA considers the government’s anticipation of a 40.1 billion deficit in the budget to be among the most relevant Budget 2023 highlights for Canadian dealers.

Some important highlights mentioned in Budget 2023 are;

• A refundable tax credit to manufacture clean technologies, such as zero-emission vehicles. 
• An investment of at least $10 billion by the Canada Infrastructure Bank through its Clean Power priority area — including at least $10 billion through its Green Infrastructure priority area
• $3 billion over 13 years towards new measures supporting a more sustainable and affordable electricity grid.

Although the budget emphasized EVs and batteries as economic priorities for investment, additional details on the amount to be invested weren’t provided, leaving automakers and Dealers a little unclear on what this looks like moving forward. With a few dangling questions in the air, CADA intends to keep putting pressure on the federal government for tax relief, getting rid of the luxury tax, taking action on the stolen vehicle crisis, and marrying electric vehicle mandates with concrete action on charging infrastructure.As a Dealer, with the limited clarity provided in the new budget, the best thing you can do is keep following your brand’s corporate electrification strategy and do your best to keep your sales team educated in all things EV as we shift into a zero-emission future. As always, Leadbox is here to help.