Hybrids surge as Canadians pull back from full electrification

Canada’s electric vehicle market continues losing momentum as consumers pivot toward hybrids, creating a major challenge for federal zero-emission vehicle (ZEV) targets.

According to S&P Global Mobility’s Q2 2025 Canadian Automotive Insights, ZEVs accounted for 9.2 per cent of new light-vehicle registrations in the quarter, down from 9.7 per cent in Q1 and well below the 18.9 per cent peak seen in late 2024. Battery electric vehicles (BEVs) slipped to 5.9 per cent, continuing a downward trend despite a 13.3 per cent increase in volume. Plug-in hybrids (PHEVs) held 3.3 per cent.

By contrast, full hybrids (FHEVs) surged to 12.9 per cent market share, overtaking the entire ZEV segment for the first time. Mild hybrids also grew to 4.2 per cent, surpassing PHEVs. Combined, hybrids now represent more than 17 per cent of the market.

“The Canadian market has reached a pivotal inflection point,” the report noted, highlighting consumer pragmatism, high interest rates, reduced ZEV incentives and charging infrastructure gaps as driving buyers toward hybrids.

Regional divide widens

Quebec remains Canada’s BEV stronghold, with ZEVs making up 17.3 per cent of new registrations and BEVs leading at 11.8 per cent versus 9.4 per cent for full hybrids.

But elsewhere, hybrids dominate.

British Columbia has flipped, with full hybrids at 16.9 per cent compared to 9.9 per cent for BEVs. Ontario leads the hybrid boom with 14.6 per cent full hybrid share and the highest mild hybrid adoption at 5.2 per cent. In Alberta, full hybrids outsell BEVs nearly seven to one.

Inside the hybrid boom

Toyota remains the foundation of the hybrid market, holding 38.1 per cent share in Q2. That’s down from nearly 49 per cent in early 2022 but still dominant. Its RAV4 and Highlander hybrids continue to anchor the segment, while Lexus maintains a strong premium presence.

Honda has emerged as the breakout challenger, climbing from just 1.2 per cent in early 2022 to 25.8 per cent in Q2 2025, thanks to hybrid versions of the CR-V and Civic.

“This rise demonstrates how quickly a legacy automaker with the right product can capture massive public interest in hybrids,” the report said.

Ford, once Toyota’s main rival, has slipped to 11.8 per cent from 26% in 2022, as its truck-heavy hybrid lineup loses ground to car and SUV offerings. Hyundai remains steady in the 9-12 per cent range, while Kia is gaining traction at 4.5 per cent.

ZEV shake-up: Tesla collapses, Ford rises

Tesla’s Canadian market share has cratered, going from 46.7 per cent in early 2022 to just 7.8 per cent in Q2 2025, with year-to-date volume down 65.6 per cent. The decline reflects both increased competition and consumer hesitation toward BEVs amid affordability and infrastructure concerns, the report said.

Ford now leads the ZEV pack overall at 12.9 per cent, followed by Chevrolet (9.7 per cent), Toyota (9.3 per cent), Kia (9.5 per cent) and Hyundai (8.7 per cent). Chevrolet’s rise has been dramatic, peaking at 16.8 per cent in late 2024 before settling back.

Toyota’s steady climb underscores its dual strength in hybrids and ZEVs.

“Toyota has successfully transformed itself from a small ZEV participant into a top-tier competitor, leveraging its brand trust and manufacturing prowess,” the report said.

Mandate under pressure

The surge in hybrids — vehicles that do not count toward ZEV targets — poses a major challenge for Ottawa’s electrification mandate. With incentives scaled back and tariffs on Chinese BEVs at 100 per cent, affordability remains a key barrier.

“The current market trajectory, with consumers favouring non-ZEV hybrids, creates a substantial gap between market reality and the federal government’s ambitious ZEV sales targets,” the report stated. “This disconnect poses a strategic challenge for automakers and policymakers alike.”

What to watch in Q3 and beyond

S&P Global Mobility highlighted the following factors to watch out for in the coming months and beyond:

• Honda’s momentum: Can Honda sustain its hybrid surge and close the gap with Toyota, or will growth plateau?
• The ZEV rebound: Will new, more affordable BEVs from Chevrolet, Hyundai or a repositioned Tesla regain share in Ontario and B.C.?
• Policy response: Will Ottawa adjust timelines or incentives as hybrids dominate and ZEV adoption slows?

“The trends observed in Q2 2025 are not a temporary anomaly but rather a clear signal of the market’s maturation and the priorities of the mainstream Canadian consumer,” the report said. “This shift has profound implications for various stakeholders.”