Madam Chair and committee members, thank you for the invitation to appear here today as part of your consultations.
The Canadian Vehicle Manufacturers' Association, CVMA, is the industry association representing Canada's leading manufacturers of light- and heavy-duty motor vehicles. Our membership includes Ford, General Motors and Stellantis. CVMA members have been operating here in Canada for over 100 years. They're responsible for most auto production in this country, having built 100 million vehicles since 1945. Today, they are the largest employers, investors and innovators in the auto manufacturing sector in Canada.
The consultation comes at a critical time for the Canadian economy. U.S. tariffs and trade uncertainty are weighing on both exports and investment, weakening the growth outlook. The Bank of Canada projects that the economy will remain in low gear for the next three years, with annual growth below 2%. Trade disruptions are particularly damaging to the export-dependent automotive sector that operates based on an integrated North American supply chain. Over 90% of Canadian vehicle production is destined for the U.S. market. According to the Center for Automotive Research, a U.S.-based auto think tank, U.S. tariffs are going to cost the auto industry $188 billion U.S. over the next three years.
Considering this, securing access to the U.S. market is foundational to the success of the auto industry and the broader Canadian economy. Simply put, there is no auto industry without U.S. access and North American integration. Diversification cannot replace the U.S. Canada's market is too small to justify large-scale manufacturing.
Our top priority is the removal of the U.S. section 232 tariffs, the elimination of Canada's retaliatory tariffs and the renewal of our trilateral trade agreement, CUSMA.
In the face of these unprecedented trade challenges, Canada must do everything possible to strengthen conditions for auto investment by focusing on what we can control. We recommend the following actions.
Number one is to eliminate the Canada-China strategic partnership. The agreement negotiated with China to allow 49,000 EVs into Canada—that's equivalent to 30% of EVs sold here last year—will undermine Canada's auto sector and put the integrated supply chain at risk. China does not adhere to many of the rules-based trade and investment principles that have been foundational to the success of the industry here, and there are no guardrails in this agreement to ensure a level playing field for manufacturers that have invested in Canada, or to protect Canadians from cyber-risk.
Number two is to reduce regulatory complexity. Environmental compliance costs now rival the tariff burden facing auto manufacturers in Canada. Manufacturers must comply with duplicative EV sales mandates, stringent emissions regulations and over 80 designated material products or categories for extended producer responsibility regimes. These add costs and have marginal environmental benefits. The federal government should ensure that regulations are outcomes-based, applied once and designed to limit compliance costs. If governments are to succeed in creating one Canadian economy, action is required now to ensure one national approach to vehicle emissions regulations and EPR regimes.
Number three is to extend and amend the clean electricity and clean manufacturing investment tax credit to 2040. Auto is a very long lead-time industry, and an extension of the tax credit to 2040 would provide certainty for investment. To provide greater flexibility, incentive and benefit, the ITC eligibility should be broadened to include all qualifying manufacturing to incentivize large-scale investments and the costs of new machinery and equipment.
Number four is to boost EV demand. The federal government's EV affordability program, EVAP, was a critical component of the automotive strategy that aimed to achieve 75% EV sales by 2035. However, the program is set to expire in 2030. That's well before the ambitious 2035 government target, so we recommend that budget 2026 provide long-term funding and a path forward for the incentive to support both the 2035 sales target and the 2040 target that the government has established.
In summary, budget 2026 should position Canada as one of the most competitive jurisdictions in the world for auto manufacturing and investment.
Thank you.