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Canada's Zero-Emission Vehicle Market Shows Resilience, While The U.S. Faces Headwinds, BMO Says

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There's a tale of two zero-emission vehicle (ZEV) markets in North America, with diverging paths as Canada recovers and the U.S. slows, according to Bank of Montreal Capital Markets (BMO) in a Thursday note.

Canadian ZEV sales remained above year-ago levels in May, increasing nearly 20% annually, though the pace of growth has moderated from the initial post-incentive rebound, said BMO. ZEV market share stayed just below 10%, indicating that sales are normalizing at a more sustainable level following the sharp recovery that began in February.

Regional trends have diverged, with Quebec experiencing the fastest normalization as ZEV sales growth slowed to just under 6% year over year in May. In contrast, Ontario and British Columbia continued to show stronger momentum, with sales growth accelerating to about 31% and 27%, respectively.

The potential arrival of Chinese electric vehicles remains a key factor to watch, although their presence in the Canadian market has remained limited so far, with just 6,531 units sold through last Friday, wrote BMO Senior Economist Erik Johnson in the note.

In contrast, US ZEV sales remain under significant pressure, declining around 18% year over year as the expiration of federal tax credits weighs heavily on demand, according to the bank.

Looking ahead, renewed geopolitical tensions -- particularly between the US and Iran -- could provide further support for alternative-fuel vehicle adoption if they contribute to sustained volatility in oil prices, added BMO.

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