In the first month after Trump’s tariffs took effect, Canadian exports of automobiles to the United States fell by a striking 23%. While some automakers decreased production and embraced layoffs, others maintained full operations, and everyone held their breath to see the long-term impacts.
Safe to say it’s been a whirlwind year for the automotive industry. Now, well into the new status quo of no longer having a status quo, we’ve brought together the top automotive insights shaping the industry today.
EVs: policy pivots, hybrid momentum and the China wildcard
In 2025, all-electric car sales fell by 40%, amid uncertainty over U.S. tariffs, the end of the rebate program and political rhetoric south of the border. Even as the industry was already recalibrating, Prime Minister Mark Carney announced changes to Canada’s electric vehicle strategy, eliminating EV sales mandates in favour of expanded investments in EV charging networks and the reinstatement of EV subsidies.
Subsidies will help with course-correcting, but it won’t happen overnight. Charging infrastructure remains notoriously unreliable and expensive, and the growing influx of made-in-China EVs poses a direct challenge to domestic production.
But automakers aren’t moving away from electrification. They’ve embraced the growing popularity of hybrid models, leaning into technologies that offer the best of both worlds: power and reduced fuel consumption.
Supporting this flexible approach, they’re also investing in assembly lines capable of producing the same car model with multiple engine types, allowing customer demand to drive production.
Affordability: prices plateau, but sticker shock remains
Affordability concerns have plagued the industry since COVID-19 supply chain issues, with tariffs only adding to the fire, ultimately leading to steep car price increases. According to Autotrader.ca, the price of a new car in 2019 was $39,000. Since then, prices have increased by about 62%. However, there is some good news on the horizon. New statistics from Autotrader.ca indicate that while prices are still higher than prior to 2021, they are beginning to level off. The average cost of a new car was $63,264 in the third quarter of last year, while used vehicles sat at $36,911.
Shift in taste: value wins, luxury retreats
Rising prices and broader concerns about the economy are also driving a shift away from luxury vehicle purchases. Compared to 2021, which was a good year for used-car purchases, 2025 saw an 11.6% decline in luxury used-car sales, compared to just 7% for mainstream brands. Purchasers are showing increased interest in exploring newer – and cheaper – brands, particularly those from China.
Driving into the AI era
The AI craze isn’t limited to the tech sector. Automakers are seeking creative ways to utilize the new technology. Newer car models offer capabilities that let drivers ask the AI for directions, play music, adjust the temperature in their vehicle, or even read and reply to messages. All signs point to future cars being increasingly voice-activated, without the need to connect your phone directly.
Some features, touted as safety measures, take it a step further: AI-assisted technology allows cars to detect if a driver is distracted, monitor their vitals, and even gauge their mood. While these innovations show real promise, the industry is still figuring out how to balance innovation with privacy concerns.
Summary
Driven by domestic policy shifts, tariff effects, and price-conscious consumers, Canada’s car industry is remodelling itself. Electrification is continuing, albeit with greater caution. Affordability is reshaping demand, and brands are racing to integrate AI features that enhance connectivity and the in-car experience in an increasingly competitive marketplace.
