The federal government granted Ford Motor Co. $464.5 million earlier this month so it can reopen its Oakville, Ont., assembly plant and start producing Super Duty pickup trucks this year, a shot in the arm for a sector in the midst of one of its most severe downturns ever. But giving Ford nearly half a billion dollars so it can build internal combustion engine (ICE) vehicles in Canada and at a smaller scale — with the plant’s output poised to shrink to no more than 100,000 vehicles per year from 247,000 in 2019 — also marked a major shift by the government. Up until last year, it had focused on building a domestic electric vehicle supply chain. But a collapse in EV demand and ongoing trade disruptions with the United States have pushed it into triage mode, attempting to manage multiple headwinds that have left the sector on rocky ground and sown tensions between stakeholders. “I really, really think we’ve been able to square the circle with our auto strategy, which is indeed not an easy one,” Industry Minister Mélanie Joly told a crowd of business executives and academics on May 7 at the Public Policy Forum’s Canada Growth Summit in downtown Toronto. She said the problem her government sees, beyond eliminating U.S. tariffs, is that EV adoption is increasing everywhere in the world, but not in Canada and the U.S. EV sales dropped 34.7 per cent in Canada last year to 9.5 per cent of new registrations from 14.6 per cent in 2024. Worldwide, EV sales accounted for 25 per cent of all new vehicles in 2025. Along with that decline, many, though not all, of the estimated $46 billion of investments in a Canadian EV supply chain announced between 2020 and 2024, have been delayed or scrapped altogether. For example, Honda Motor Co. Ltd. “indefinitely suspended” its proposed $15 billion EV assembly plant and battery manufacturing complex in Alliston, Ont., two weeks ago. Yet the federal government in February announced it was committing billions of dollars to build out EV charging infrastructure and shave money off the cost of an EV. Joly also said the decline in EV sales is why the government struck a deal in January that allows China to send up to 49,000 EVs into Canada this year at a 6.1 per cent duty rate. But none of those policies provide immediate relief to automakers here since hardly any homegrown EVs are produced. Automakers have repeatedly said through their representatives that their most urgent concern is securing access to the U.S. market, where historically, an estimated 80 per cent to 90 per cent of all vehicles built in Canada are eventually sold. “If we do not have U.S. access, we do not have an auto industry ,” Brian Kingston, president of the Canadian Vehicle Manufacturers’ Association , said. “That’s just the bottom line.” He estimates that automakers in Canada in 2025 paid $5 billion in U.S. tariffs, which still stand at 25 per cent on vehicles not compliant with the Canada-U.S.-Mexico Agreement (CUSMA), minus the value of any U.S. parts contained within. Although Prime Minister Mark Carney and his cabinet continue to push for a trade resolution with the U.S., stakeholders in the auto sector say they are increasingly worried that the longer the tariffs persist, the dimmer the future for auto manufacturing in Canada looks. “The tariffs are crushing everything and that was the intent,” Lana Payne, national president of Unifor, the labour union representing the largest number of auto workers, said. “That money has to come from somewhere … and that’s the money we count on to be reinvested into plants.” The interplay of tariffs and the collapse of demand for EVs have contributed to the contraction in auto manufacturing. For example, Stellantis closed its Brampton, Ont., assembly plant in 2023 as part of a $3.6-billion overhaul of its Canadian operations to allow it to produce an EV version of the Jeep Compass, as well as hybrid and ICE versions. But it halted all construction last year and then separately announced it would make the Jeep Compass in Illinois, rather than in Brampton. Joly has initiated a dispute resolution process to try to recover roughly $220 million that the federal government gave Stellantis for the Brampton overhaul. She has also said she will get money back from General Motors Co. , which closed its plant in Ingersoll, Ont., where it made BrightDrop electric delivery vans until that model was cancelled last year due to a lack of demand. Those two assembly plants used to produce hundreds of thousands of vehicles per year in total, were home to thousands of employees and helped keep tens of thousands of jobs outside the plants. “We won’t let these people down and I won’t let these people down,” Joly said, describing the auto sector as “the backbone” of the Canadian economy and a necessary component of an industrial power. But it’s not clear when EV demand in North America will rebound to previously anticipated levels. Although EV sales in Canada rose in March to 12.6 per cent of all new sales , they have been falling in the U.S. and now make up about six per cent there through the first quarter of 2026. The other major headwind for Canadian automakers is access to the U.S. market. Although Canada represents the largest export market for U.S. automakers, that has not created enough leverage so far to persuade the U.S. to drop its tariff regime. As a result, Carney has proposed a new credit system whereby automakers that manufacture in Canada could earn credits that can be used to import vehicles . The idea being to tie market access to investment in manufacturing here. “As a Plan B, it’s a good idea,” Brendan Sweeney, chief executive of the Pacific Manufacturing Association of Canada, a lobby group that represents Honda and Toyota Motor Corp. , said. “But the operative words in there are ‘Plan B.’ Plan A is free trade with the United States so we can get back to what is normal and effective.” Even as automakers push for a return to an integrated North American auto manufacturing sector that existed prior to recent U.S. tariffs, there are questions about whether that would be enough to revive Canada’s auto sector. The number of vehicles sold in Canada that are imported from either the U.S. or Mexico has been steadily declining during the past decade. Last year, the U.S. and Mexico accounted for 65 per cent of all imported vehicles, down from 73 per cent in 2016. That’s coincided with a steep drop in auto production in Canada. Auto production declined eight per cent to 1.2 million vehicles in 2025, and it’s down 33 per cent since 2019, so it has still not achieved a post-pandemic recovery. Honda suspends Ontario EV plant ‘indefinitely’ after posting first-ever lossTerence Corcoran: Any Canadian auto trade deal will be flawed Meanwhile, competition from overseas has intensified. Automakers in South Korea accounted for 11.5 per cent of Canadian auto imports in 2025, up from 5.2 per cent in 2016. Similarly, Japan accounted for 11.2 per cent of auto imports in 2025, up from 7.5 per cent in 2016. Payne said her union is concerned that Canada has “opened up our market way too much to imports” and, along with others, is worried that opening Canada to Chinese EVs could derail discussions to eliminate U.S. tariffs. The U.S. has maintained 100 per cent tariffs on Chinese EVs since 2024. As part of any trade deal with Canada, the U.S. may even push for new prohibitions, such as rules against using Chinese parts and software in any vehicles built in North America, Eric Miller, president of the Washington, D.C.-based Rideau Potomac Strategy Group, a trade and government affairs consultant, said. Securing a trade deal with the U.S. could open up avenues for expansion. Ford is building a new metal stamping plant in Oakville and it eventually may decide to ramp up production there beyond 100,000 vehicles if it gains duty-free access to the U.S. market. But Canada’s commitment to the EV transition continues, just at a smaller scale than in the past few years. In recent weeks, it gave tens of millions of dollars to help start a refinery in Ontario that will produce cobalt, a key battery metal, and there are other battery supply chain operations proceeding elsewhere. The government, however, is hedging its bets by providing support for an EV and battery supply chain as well as ICE production. “The future of the auto sector is quite complicated,” Miller said. • Email: gfriedman@postmedia.com