When reports arose that Honda was scaling back its electric vehicle (EV) operations in Ontario, much of the reaction focused on the automaker itself and what it meant for Canadian manufacturing. But from an insurance perspective, Honda’s decision is less a cause than a consequence.
“It’s not the problem, it’s a symptom of the problem,” says Derrick Osborn (pictured), national practice leader, automotive, at HUB International. The real issue, he argues, is what happened when Canada’s ambitious EV mandate was put in place – and then abruptly scrapped.
In 2022, the federal government set a sweeping target: it wanted 100% of new light-duty vehicles sold in Canada to be electric by 2035. That came with interim benchmarks, including a 2026 milestone, and – crucially – with incentives designed to pull consumers into EVs.
Right now, EVs are sitting at roughly 8% of the vehicle fleet. Adoption is well below the trajectory needed to hit the targets, but the existence of a legislated mandate created what Osborn calls a kind of “floor” for investment confidence. Manufacturers, suppliers and others in the ecosystem could reasonably assume that policy would steer demand in their favour.
“The mandate phase created this false confidence and this implicit demand,” he says. In other words, capital went in on the assumption that government would keep pushing drivers toward EVs, even if they weren’t yet sold on the technology.
That bet didn’t last.
With a change in political leadership, Ottawa revisited the policy. The EV mandate was scrapped, and with it the associated federal incentives that had helped soften the higher sticker prices. That reversal, Osborn notes, came in 2025 – and the impact on sales was immediate.
“ZEV registrations fell 40% year-over-year in Q3 2025,” he says, citing Statistics Canada’s data. “There’s no longer the incentive to do it. So we saw sales just plummet.”
Only in 2026 did the government come back with a lighter package of incentives. But this time, the supports are narrower: roughly $5,000 at most, limited to a specified list of vehicles with an MSRP under $50,000. It’s a far cry from the clear, long-term signal the original mandate had sent.
That policy whiplash has left a large hole where investment confidence used to be.
"How is a company going to invest $15 billion when they believed that mandate would be there and that the demand would follow the mandate?" Osborn asks.
He's careful not to speak for any specific manufacturer, but says that with demand shrinking, the business case for large EV investments is hard to make: "The mandate's gone, demand is shrinking. Why would any company invest $15 billion?"
For the insurance sector, the fallout is showing up most directly in the cost and complexity of covering EVs in a market where adoption has stalled.
On the personal lines side, Osborn says insuring an EV is “about 30% higher” than insuring a comparable internal combustion engine (ICE) vehicle – and that’s a conservative estimate. Not only are current EV premiums higher, but the gap is widening: according to Rates.ca data, non-EV premiums rose 7.8% year-over-year in Q1 2025, while EV premiums surged 18.9%.
Batteries are a major driver of that differential. They’re expensive to repair or replace, and they often can’t be handled like conventional components when a vehicle is damaged. Modern EVs are also loaded with sensors and sophisticated electronics that increase both repair costs and the risk that a vehicle will be written off instead of fixed.
Those hard costs are compounded by a stubborn data problem. Insurers price risk based on large volumes of claims experience. With EVs still sitting around that 8% mark, the data set is thin. Low adoption means less credible loss history, which in turn leads actuaries to “price in” more uncertainty.
“It’s like this circular argument,” Osborn says. “Adoption’s low, so the premium stays high. But the premium stays high, which leads to adoption being low.”
All of this would be challenging enough in a stable policy regime. But with the rules changing mid-stream, manufacturers and their supply chains are suddenly left holding assets and plans premised on a world that no longer exists.
“Anybody who’s made any investment into this space has… they’re going to have to reforecast all the revenues because everything’s dropped down,” Osborn says. “They’ve probably made investments that have to be repurposed, if they possibly can be.”
The scrapping of the mandate “shifted everything,” he adds, with consequences radiating through the entire EV ecosystem – from automakers and parts suppliers to body shops, importers and marine cargo underwriters.
Seen through that lens, Honda’s decision to pull back on EV operations in Ontario starts to look less like an isolated retreat and more like an early indicator of a broader reset.
“The issue is the mandate’s gone,” Osborn says. “The demand is shrinking.”
Until Ottawa can provide a clearer, more consistent long-term framework, he suggests, it will be difficult for manufacturers to justify large EV investments in Canada – and just as hard for insurers to price the risk in a way that encourages, rather than deters, adoption.
