Canada’s Example for MHD ZEV Incentives
The PNWER RIA has spent a lot of time over the past year thinking about the “affordability gap” between new or used diesel vehicles, and their zero-emission counterparts. We saw this gap in the passenger vehicle market when EVs first hit the market, and while this price difference has decreased over time, the same cannot be said about Medium- and Heavy-Duty Zero Emission Vehicles (MHD ZEVs).
For Example: Drayage drivers are often the second or third driver of a Class 8 diesel truck, paying about $80,000 for their vehicles. By comparison, new electric Class 8 trucks can cost anywhere between $300,000 and $500,000. This $200,000+ cost differential makes acquiring zero emission Class 8 trucks financially impossible for drayage drivers without significant financial support.
While federal-level incentives for transitioning to MHD ZEVs are still limited in the United States, stakeholders in California have stressed the importance of state-level incentives as a key piece of ‘making the math work’ for transitioning to ZEVs. Many of these CA state incentives have a focus on equity, which enables more of the funding to go towards small fleets, which should be a best practice for other states moving forward.
However, most states in the U.S. don’t have MHD ZEV incentives - including PNWER’s 5 states - though there’s legislative effort in Washington state to change this.
At PNWER, when we see these kinds of policy gaps, our first question is often “What are our Canadian counterparts doing to address this problem?”
When it comes to bridging the affordability gap for MHD ZEVs, the answer is “a lot, actually!”
As of July 2022, Canada has a stackable system of point-of-sale incentives for Canadian organizations and businesses who buy or lease eligible MHD ZEVs. This is fairly similar to California’s HVIP program, but at the federal level.
The Federal Incentives for Medium- and Heavy-duty Zero Emission Vehicles (iMHZEV) program provides incentives based on vehicle class, which aligns with US FHWA gross vehicle weight ratings. Canada also has a federal ZEV mandate, Low Carbon Fuel Regulations, and Clean Electricity Regulations to promote ZEV and low-carbon transportation adoption paired with clean energy.
Transport Canada has a comprehensive list of iMHZEV eligible vehicles that breaks down the model year, make, model, class, type, battery size, and different levels of incentive available based on how purchase vs. lease, and length of the lease.
For Example: The Daimler-produced 2023 Freightliner eCascadia Class 8 truck with a 291 kWh battery (115 mile range) would be eligible for a $100,000 (CAD) point-of-sale incentive for customers purchasing or leasing the truck for 48-months. Customers see a decrease in point-of-sale incentives as lease-length decreases; 36-month leases receive $75,000 in incentives, 24-month leases receive $50,000 incentives, and 12-month leases receive $25,000.
The same 2023 Freightliner eCascadia truck with a 438 kWh battery (230 mile range) would receive higher incentives starting at $150,000 for purchase or 48-month leases, $112,500 for 36-month leases, $75,000 for 24-month leases, and $37,500 for 12-month leases. (See the chart below)
Screenshot of Transport Canada’s iMHZEV incentives for 2023 Class 8 eCascadia Freightliners with various battery sizes.
As previously noted, this federal incentive can be stacked with provincial level incentives, as seen in British Columbia. British Columbia has built out a robust set of provincial-level incentives for MHD ZEVs, including the Specialty Use Vehicle Incentive Program (SUVI) and the CleanBC Go Electric Commercial Vehicle Pilots (CVP) program. Using one of these programs, a 2023 Freightliner eCascadia Class 8 truck could receive an additional $100,000 point-of-sale rebate to help offset the higher costs of a MHD ZEV versus its diesel counterpart.
What this Means: A B.C.-based driver purchasing a 2023 Freightliner eCascadia with a 291 kWh battery could receive up to $200,000 in rebates, and could receive up to $250,000 if they went with the 438 kWh battery model. This means a truck owner would only be responsible for financing the $200,000 - $150,000 remaining. It’s still more than a diesel truck, but it’s a start towards reducing the affordability gap!
Screenshot of British Columbia’s stacked incentives for Class 7 and 8 vehicles. Note that the table does not include CVP rebates.
The Takeaway
Over the next year, the PNWER RIA team will be following MHD ZEV uptake in PNWER’s Canadian provinces, including B.C., and keeping an eye out for reports on the impact of these provincial and federal level incentives. We hope to see a positive impact on MHD ZEV adoption in Canada as a result of these policies, and if not, will coordinate with our partners in Canada to better understand what went wrong or should be fixed as the U.S. considers similar policies.
While these federal and provincial level purchase incentives are important, they can’t completely close the affordability gap. As the PNWER RIA, we’re investigating ways to use innovative financing to help close this gap, and get more medium and heavy duty zero emission vehicles on U.S. roads!
Citations for Links Above:
7Gen. How government incentives support your transition to fleet electrification. May 6, 2022. Link here.
California Hybrid and Zero-Emission Truck and Bus Voucher Incentive Project (HVIP). Link here.
Transport Canada. Incentives for medium and heavy-duty zero-emission vehicles. July 13, 2022. Link here.
U.S. Department of Energy. Vehicle Weight Classes & Categories. Link here.
Electric Mobility Canada. Provincial and Territorial Zero-Emission Vehicle Scorecard. 2021-22. Link here.
Transport Canada. iMHZEV - Eligible vehicles. Link here.
Daimler Truck North America. World premiere of the new battery electric Freightliner eCascadia. May 9, 2022. Link here.
Transport Canada. iMHZEV - Eligible vehicles. Link here.
Government of British Columbia. Combining rebates for medium- and heavy-duty EVs. July 2022. Link here.
Government of British Columbia. cleanBC. Specialty Use Vehicle Incentive Program. Link here.
Government of British Columbia. cleanBC. Commercial Vehicle Pilots Program. Link here.
Cover picture photo credit: 7Gen. How government incentives support your transition to fleet electrification. May 6, 2022. Link here.