Elon Musk threatens to sue Canada after Tesla was caught out for 'suspicious' behaviour

Those Tesla lawyers are pretty busy right now, with the electric vehicle brand in the midst of all sorts of litigation as both a plaintiff and a defendant.

As well as facing class-action lawsuits over claims of tampered odometers to get out of warranties, and misleading promises over Full Self-Driving software, Tesla itself is attempting to take Canada to the courts.

There's no love lost between Elon Musk and the Great White North, and in the aftermath of him cosying up with President Donald Trump while the POTUS levied taxes on Canada, Ontario Premier Doug Ford ripped up a $100 million Starlink deal.

Over 250,000 Canadians signed a petition to revoke Musk's Canadian citizenship, and while that might legally be a little tricky, we don't think he's going to be winning himself any new Canadian supporters with his latest court case.

As reported by the Toronto Star, Tesla lawyers are vexed by a recent freeze in Canada's electric vehicle tax credits.

Musk's EV brand claims that it's being locked out of $30 million in tax credits after Canada stopped issuing rebates for its Incentives for Zero-Emission Vehicles program (iZEV) back in January 2025.

Tesla grabbed headlines in March when it made 'suspicious' claims for tens of millions of dollars in iZEV rebates just before the January deadline.

The outlet points out how most of these claims can be traced to just four dealers, with one Quebec City showroom claiming it sold 4,000 iZEV-eligible vehicles in a single weekend.

Over 8,600 claims were made in just 72 hours, coming in a whopping $43 million CAD ($30.9 million USD).

This amounted to around 60% of the remaining iZEV budget.

Canadian Transport Minister Chrystia Freeland announced a specific pause on Tesla's iZEV payments amid Trump's tariff chaos, as well as telling her office to ban the company from future tax credit eligibility as long as "illegitimate and illegal US tariffs are imposed against Canada." Tesla maintains the freeze was 'inappropriate' because "Tesla Canada has been fully compliant with its participation in the program."

In a letter signed by Tesla Canada’s director of sales and service Fereshteh Zeineddin, Tesla says: "We expect payments to resume in the immediate term.

Tesla reserves all rights to seek appropriate remedies in the event we cannot consensually resolve this dispute."

Canada's two previous transport ministers, Anita Anand and Freeland, both spoke out about Tesla, with Anand writing to Canadian Automobile Dealers Association spokesperson Huw Williams: This report is unacceptable and I am asking the department that is responsible for administering this program to provide me with detailed and complete information."

After Mark Carney became Prime Minister, Freeland froze Tesla payments, pending a line-by-line investigation. In a statement to the Star, Freeland confirmed: "As soon as I became Transport Minister, I asked the department to stop all payments for Tesla vehicles in order to fully examine each claim individually and determine whether all are eligible and valid. No payments will be made until we are confident that the claims are valid."

If a legal battle ensues, Tesla will have to make a case for being able to file claims after EVs were delivered, which is something the courts have struggled to agree on in the past.