Falling Tesla (TSLA) sales in the first quarter of 2023 helped knock zero-emission vehicle (ZEV) registrations in Canada from a record high at the end of last year, according to S&P Global Mobility.
Elon Musk's electric vehicle brand typically accounts for 40 to 50 per cent of ZEV sales in Canada, S&P says in its report. Tesla registrations fell by 30 per cent in the quarter, pulling the company's total share of the ZEV market to 30 per cent, its lowest level since Q3 2021. S&P says this was mainly due to declines in Ontario and Quebec.
Ford's (F) market share in Canada's ZEV sector also dropped in the first three months of 2023, falling by four percentage points, according to the report.
Canada-wide, the combined market share of ZEVs, which include battery electric, plug-in hybrid electric, and hydrogen fuel-cell vehicles, fell by a full percentage point from 10.2 per cent in Q4 to 9.1 per cent in Q1.
"While the fourth quarter was a significant milestone for ZEVs in Canada, the decline in the first quarter suggests potential challenges ahead," the report's authors wrote, pointing to rising inflation. "Along with other inflationary measures, these factors may pose obstacles to the widespread adoption of ZEVs when price is a factor for the consumer."
The Consumer Price Index increased 4.4 per cent in April, frustrating the Bank of Canada's efforts to control rising prices. According to Autotrader.ca's price index, the average price of a new vehicle was $61,821 in the first quarter of 2023.
Scotiabank recently warned that high borrowing costs and stubborn inflation could jeopardize Ottawa's plan to eliminate conventional light-duty auto purchases by 2035.
ZEV sales in Canada by province
Ontario saw the steepest decline in Q1, with ZEV registrations amounting to 6.2 per cent market share, down from 8.3 per cent in Q4, marking a 25 per cent quarterly drop.
Earlier this month, a General Motors (GM) executive called Canada's most populous province a "laggard," suggesting the elimination of government subsidies has put the province behind on sales.
British Columbia continued to see strong ZEV adoption, accounting for more than a quarter of all new registrations in the country. ZEVs had a 19.7 per cent share of registrations within the province in Q1, down slightly from 20.1 per cent in the previous quarter.
In Quebec, ZEVs booked a 14.4 per cent share in Q1, down slightly from 14.6 per cent in Q4. Nova Scotia and Prince Edward Island saw single-digit increases.
"Looking longer term, the Q1 results are a bump in the road," S&P wrote in the report. "The market share of ZEVs in Canada is projected to continue growing, and [is] targeted to reach 16 per cent in 2024, with [about] 300,000 ZEVs in the country."
Jeff Lagerquist is a senior reporter at Yahoo Finance Canada. Follow him on Twitter @jefflagerquist.