Tesla is threatening legal action against the Canadian government for unlawfully freezing over $43 million in handouts, demanding their immediate resumption.

Tesla expressed surprise to Transport Canada on March 28 regarding then-minister Chrystia Freeland's decision to halt electric vehicle (EV) subsidies. The halt followed an investigation into 8,600 claims filed by the company in the final 72 hours of the program.

Tesla first learned about the sudden freeze through media reports, according to the Toronto Star. It left hundreds of Canadian auto dealers out of pocket more than $10 million.

On January 10, the federal government quietly removed its $5,000 rebates for electric cars—a gimmick that kept the EV mandate afloat, until now.

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A letter obtained via access-to-information reveals Tesla Canada asserting full compliance with Transport Canada's program and demanding the immediate resumption of payments. “We expect payments to resume in the immediate term,” said the letter 

“Tesla reserves all rights to seek appropriate remedies in the event we cannot consensually resolve this dispute,” penned Fereshteh Zeineddin, Tesla Canada’s director of sales and service. 

Canada quietly ended all EV rebates in mid-January, earlier than the approved funding through March 31. The program distributed nearly $3 billion to over 500,000 buyers since 2019.

Transport Canada informed Canadian dealerships via email on January 10 that funding for EV rebates were dwindling, with funding exhausted soon after. Four Tesla locations claimed $43.1 million in rebates, depleting the program by the end of the weekend.

Independent dealerships fronted $10 million in rebates to customers, but a surge in claims left 226 dealerships without reimbursement options.

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Tesla vehicles were eligible for these rebates at the time of the freeze, except those exceeding $55,000, reported Blacklock’s. “All vehicles that appear on the list have been deemed eligible under the Incentives For Zero Emission Vehicles Program,” said a Transport Canada notice. 

The department did not clarify which authority Minister Freeland used to "stop all payments for Tesla," noting that several Tesla models were already disqualified due to price increases. 

Canada's federal iZEV program offered up to $5,000 off eligible electric and plug-in hybrid vehicles, with dealers applying the rebate and receiving government reimbursement to promote adoption.

The Liberals are forcing Canadians to buy overpriced, subsidized EVs from their hand-picked, foreign-owned plants—while sacrificing Western Canadian farmers to a Chinese trade war.

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— Rebel News (@RebelNewsOnline) March 17, 2025

Transport Minister Chrystia Freeland, according to a March 26 Toronto Star story, ordered a halt to Tesla vehicle payments to investigate the eligibility and validity of each claim. 

The company admitted to retroactively filing rebate claims for previously sold vehicles, asserting its permissibility despite contradicting language on the government's website.

“Tesla expects the department to … continue program delivery — that is to pay out these claims per the long-standing program design,” their letter stated.

Freeland’s payment freeze was made between her appointment and the election call, reported the Star. The automaker argues this freeze is unlawful. CBC News and Reuters also reported no legal justification for the announcement.

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The freeze also came about for a second reason—to punish America for its punitive tariffs.’’

“No payments will be made until we are confident claims are valid,” said Freeland at the time. “I also directed my department to change the eligibility criteria for future zero emission vehicle programs to ensure Tesla vehicles will not be eligible for incentive programs so long as the illegitimate and illegal U.S. tariffs are imposed against Canada.”

On March 26, 2025, U.S. President Trump announced a 25% tariff on imported vehicles and select auto parts, effective April 2, 2025, with enforcement details pending.

Due to tariffs on Canadian goods starting March 4 and reciprocal tariffs in April, Canada halted funding to Tesla and excluded it from future programs in retaliation.

Tesla CEO Elon Musk, head of the Department of Government Efficiency, has been leading the White House effort to shrink the federal government and budget.

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