It’s already more cost-effective in the long run to buy an electric vehicle than a gasoline-powered model, but the savings must be significantly higher if Canada is to meet its electric vehicle sales targets, the Parliamentary Budget Officer (PBO) concludes in a new analysis.
The PBO report released Thursday comes eight months after the federal Liberals decreed that battery-powered vehicles must account for one-fifth of all new vehicle sales by 2026, increasing each year until reaching three-fifths by 2030, and all vehicles by 2035.
The most recent statistics show that in 2023, electric vehicles accounted for almost 11% of new vehicle registrations, the first time this figure has exceeded 10% nationally.
The report compares the purchase price of a new vehicle, as well as federal and provincial rebates for electric vehicles and operating and maintenance costs over eight years.
For cars, the eight-year cost of an electric model in 2022 was 88% of the eight-year cost of a similar gasoline model, and for SUVs and trucks, electric models are about 92% of the cost to buy, operate and maintain a gasoline option.
Although electric vehicles are more expensive to purchase than gasoline models (around 6% more for comparable models), operating and maintenance costs can be up to 2.5 times lower per year.
Yet the PBO says that’s not enough to get people moving to electric vehicles as quickly as governments want.
Selling price savings would need to increase by 31% to meet the 2030 targets, the report said. That means if the cost of an electric car or truck is 95% of the cost of buying and maintaining a gasoline model today, it would need to drop to about 65%.
For Joanna Kyriazis, director of public affairs at Clean Energy Canada, it’s clear that electric vehicles are cheaper to run, but that’s not enough to encourage many people to make the switch.
“After all, higher upfront costs are a barrier for many cash-strapped families, even if they recognize that an electric vehicle would save them money over time,” she said.
She noted that price makes a difference, noting that electric vehicles accounted for one in four new vehicles sold in Europe in 2023. Europe has 11 different electric vehicle options that cost less than $45,000. In Canada, there were only two, and electric vehicle sales accounted for 10.8 per cent of sales last year.
Environment Minister Steven Guilbeault said in a statement that the PBO report was “thoughtful” and noted that it confirms that prices for electric vehicles continue to decline relative to gasoline-powered models.
Government regulations that set the sales mandate contribute to this, with one study suggesting that gasoline vehicles will cost 6.1% more by 2035, while electric vehicles are expected to cost 22% less because of the mandate.
He noted that the PBO report does not include the purchase or cost of plug-in hybrids, which for some consumers provide a bridge between a fully electric vehicle and a gasoline model.
In 2023, plug-in hybrids, which use both an electric motor and an internal combustion engine, accounted for 3% of total vehicle sales and 24% of all battery electric vehicles sold.