Canada’s Car Industry in 2025: What You Need to Know

Canada’s Car Industry in 2025: What You Need to Know

The automotive industry in Canada is navigating one of its most turbulent and transformative years in decades, and the effects are being felt by drivers, dealers, and manufacturers alike. Let’s break down the biggest developments shaping the market and what they mean for you as a car buyer.

Tariffs and Trade Tensions Are Reshaping the Market

One of the most impactful stories of 2025 has been the sudden introduction of new 25% tariffs on vehicles and parts between Canada, the United States, and Mexico. These tariffs have disrupted three decades of largely tariff-free auto trade under the USMCA framework. 

Why This Matters

  • Higher prices for Canadians: Imported cars, especially those built in the U.S. or beyond North America, now carry significantly higher costs, making new vehicles even less affordable for many shoppers. 

  • Supply chain headaches: Tariffs have also created uncertainty in inventory and delivery times for new cars and parts.

  • Manufacturers pivoting production: Canada is now importing more vehicles from Mexico and other regions to avoid tariffs, reflecting shifts in how automakers balance production and costs.

  • Political tensions: Canadian leadership, including Prime Minister Mark Carney, has publicly criticized the tariffs for threatening North American supply chains and competitiveness.

For consumers, this means higher purchase prices and more volatile inventory, both new and used.

New Vehicle Sales & Market Demand Trends

Even with some seasonal dips in sales, overall vehicle sales in Canada have shown resilience. Despite a modest decline month-over-month, sales have remained relatively stable in the face of market uncertainty.

What’s Changed in Buyer Behaviour

  • Buyers are increasingly prioritizing affordability over luxury. Practical models like the Ford F-150, Toyota RAV4, and Honda CR-V have dominated searches and sales through 2025.

  • There’s growing consumer interest in cars assembled in Canada, a trend driven by national pride and concerns about cross-border tariffs. A recent survey found that 72% of Canadians want their next vehicle built or assembled in Canada.

Electric Vehicle Market Faces Headwinds

Canada’s EV segment, once one of the fastest-growing parts of the industry, has seen a notable slowdown. According to industry data, the percentage of shoppers planning to buy an EV dropped significantly in 2025 compared to 2024. 

Why EV Growth Is Slowing

  • Higher prices: EVs continue to cost thousands more on average than gas-powered cars, and tariffs have further complicated pricing.

  • Reduced incentives: Several federal and provincial rebate programs were cut or ended in 2025, reducing the financial appeal for many buyers.

  • Mandate debate: Manufacturers and industry groups have publicly raised concerns about Canada’s EV sales mandates, citing lower demand and infrastructure challenges.

Industry Investment & Long-Term Opportunities

Despite these challenges, there’s reason for optimism. The federal government and private industry are investing heavily in EV manufacturing and supply chains, including sizeable funding for Canadian companies focused on EV parts and battery technology.

These efforts aim to:

  • Strengthen Canada’s role in the global EV ecosystem

  • Create high-quality jobs

  • Boost domestic production and reduce reliance on imports

What This Means for Car Buyers in Canada

Here’s how these major industry developments could affect you:

✔️ Higher prices on new vehicles, especially imported ones
✔️ Growing demand and higher used-car values due to limited inventory
✔️ More interest in Canadian-made models
✔️ Slower EV adoption without incentives
✔️ Potentially longer wait times for certain models

Conclusion: A Transitional Year for Canadian Auto Buyers

2025 has been a year of volatility and transformation in the Canadian automotive market. Trade policy changes, shifting consumer priorities, and strategic investments are all converging, and that means Canadian car shoppers need to stay informed.

At Lane11 Motors, we’re watching these trends closely to help you make smart buying decisions, whether you’re considering a new or used vehicle. From price shifts to supply changes, we break down what matters so you can drive with confidence.

 

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Photo by KJ Brix on Unsplash

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