Canada electric vehicle industry insights: Q3 2025

• 16.9% Hybrid electric vehicle (HEV) share: Hybrids capture a record market share, solidifying their position as the dominant alternative powertrain choice for Canadians.
  
  
• Zero emission vehicle (ZEV) volume decreased by -0.4%, while total light-duty vehicles (gross vehicle weight (GVW =< 8,500 lbs.*) volume decreased by -11.8%.
  
  
• The market share for battery electric vehicles (BEV) increased to 6.3%, with volume decreasing by -6.1%.
  
  
• Quebec has the highest ZEV adoption rate of all provinces with ZEVs accounting for 12.8%.
  
  
• Quebec leads in overall ZEV volume in Canada; accounting for 49.3%.

Executive summary: Q2 2025 Canadian market insights

The third quarter of 2025 solidified a profound shift in the Canadian automotive market, revealing a complex, two-track transition in which consumer pragmatism has forced a major re-evaluation of federal policy. The data tells a clear story: alhtough the long-term goal of electrification remains, the immediate path for the mainstream consumer is overwhelmingly being paved by hybrid technology.

Hybrid dominance accelerates: The consumer surge towards hybrids (HEVs) accelerated dramatically, with their national market share reaching a record 16.9%. This confirms that for the majority of Canadian buyers, hybrids have become the undisputed transitional technology of choice, prized for their practicality, affordability, and freedom from range anxiety.

This trend is most pronounced in Ontario, the nation's largest market, where hybrids are the primary engine of emissions reduction for the average consumer.

ZEVs Rebound but face headwinds: Simultaneously, the ZEV segment showed resilience, rebounding to a 10.4% market share. However, this growth is increasingly concentrated and reliant on Quebec's unique pro-ZEV ecosystem, which accounts for a disproportionate share of national BEV sales. Outside of Quebec and the balanced battleground of British Columbia, ZEVs are struggling to compete against the compelling value proposition of hybrids.

Policy follows the market: This widening chasm between consumer preference and policy ambition culminated in the federal government's decision to pause the ZEV mandate in October. The market data makes it clear that the mandate's targets had become untenable against the tide of hybrid adoption.

This policy shift fundamentally alters the strategic landscape for automakers, moving the immediate regulatory focus from meeting ZEV-specific quotas to achieving broader fleet wide greenhouse gas (GHG) emissions standards—a reality that elevates the strategic importance of high-volume hybrid models as critical compliance tools.

Commercial sector signals a different future: In contrast to the consumer market, the medium and heavy-duty vehicle sector showed signs of a direct leap to battery-electric technology in specific use cases. A nearly tenfold surge in Class 8 BEV penetration, while small in absolute terms, signals that if the business case is strong, commercial fleets are willing to bypass transitional steps and make significant, concentrated bets on a fully electric future.

In summary, Q3 was the quarter where the consumer voice, expressed through purchasing patterns, directly impacted and reshaped national policy. The Canadian market is not undergoing a single transition, but a series of complex, regionally distinct, and segment-specific shifts that demand a nuanced and flexible strategy from all industry stakeholders.

The Q3 2025 data confirms that the "Great Reversal" seen in Q2, when hybrids first overtook ZEVs, was not an anomaly but the beginning of a major market realignment. The Canadian consumer has established a clear hierarchy of preferences for alternative powertrains, and full hybrids are unequivocally at the top.

The Great Acceleration: What began as modest reversal has now become a decisive and widening gap. Hybrids (16.9%) are not just outselling the entire ZEV segment (10.4%); they are pulling away at an accelerated pace. This indicates that for the majority of new car buyers moving away from traditional gasoline vehicles, the immediate and practical benefits of hybrids are proving more compelling than the all-electric promise.

A new pecking order for Q3 2025. The data reveals a clear ranking of consumer preference among alternative powertrains:

• HEV (16.9%): The undisputed leader, experiencing explosive growth.
  
  
• BEV (6.3%): Rebounded from Q2, but its growth is overshadowed by the hybrid surge.
  
  
• PHEV (4.2%): A solid performer showing consistent growth, carving out a significant niche.

The trends solidified in Q3 2025 have set the stage for a dynamic and consequential end to the year. The diverging paths of consumer choice and policy ambition will be the central story. Key market dynamics to monitor will be:

• Hybrid momentu:. Hybrids have seen explosive, record-setting growth, capturing a 16.9% national market share. The critical question for Q4 is whether this momentum can be sustained. Will it begin to plateau as pent-up demand is met, or will it continue to accelerate, further widening the gap with ZEVs in key markets like Ontario?
  
  
• The ZEV conversion challenge: While the ZEV segment rebounded to a respectable 10.4% share, its growth is being overshadowed by the hybrid surge. The key challenge for ZEV proponents is no longer just selling to early adopters but converting the pragmatic, mainstream consumer who is currently flocking to hybrids. Watch for the impact of new, more affordable ZEV models and whether they can effectively compete on price and practicality.

Strategic Outlook and Implications for the Canadian EV Market

The trends observed in Q3 2025 are not a temporary anomaly but a clear signal of a market maturing into distinct segments with different priorities. This has implications for all stakeholders.

For automakers (OEMs): The Canadian market is unequivocally rewarding a flexible, multi-powertrain strategy. Brands with strong and appealing offerings across the hybrid, PHEV, and BEV categories are best positioned to capture share in this fragmented landscape.

A provincially-nuanced approach is now critical; a ZEV-heavy strategy may succeed in Quebec but will face significant headwinds in Ontario and the Prairies, where a strong hybrid portfolio is essential for volume. Pure-play ZEV manufacturers must urgently address the affordability and practicality concerns that are driving mainstream consumer to their competitors.

For policymakers: The recent federal decision to pause the ZEV mandate is a direct reflection of the market realities illuminated in this quarter's data. The overwhelming consumer preference for non-ZEV hybrids, especially in critical markets like Ontario where they outsell ZEVs by more than two-to-one, created an untenable gap between the mandate's ambitious targets and achievable market adoption.

The Q3 results, with a national hybrid share of 16.9% dwarfing the ZEV segment, effectively represent the market data that likely necessitated this policy re-evaluation.

This policy shift, however, does not eliminate regulatory pressure refocuses it. Automakers must still meet stringent fleet-wide GHG emissions standards. With the ZEV mandate's specific targets temporarily shelved, the strategic importance of hybrids as a compliance tool has been magnified.

The pause provides automakers with the regulatory breathing room to lean into consumer demand, using high-volume, popular hybrid models to lower their overall fleet emissions and meet the pressing GHG requirements.

*Transport Canada definition of light-duty passenger vehicles with the iZEV program.