Canada Opens EV Market; Tesla Poised to Benefit from Tariff Changes
- tech360.tv
- 8 hours ago
- 3 min read
Canada will permit the annual import of up to 49,000 electric vehicles from China, implementing a 6.1% tariff under most-favoured-nation terms. This policy change, according to experts, could see Tesla, with its established Canadian sales network and production capacity, become an early beneficiary.
The agreement allows 49,000 Chinese-made electric vehicles to enter Canada each year. A 6.1% tariff will apply, and Canadian Prime Minister Mark Carney stated that the annual quota could potentially increase to 70,000 vehicles within five years.
However, half of the vehicle quota is reserved for models priced under CAD 35,000 (USD 25,189). All Tesla models currently exceed this price point, potentially limiting their immediate access to this segment of the market.
Tesla holds an advantage, having equipped its Shanghai plant, globally recognised as its largest and most cost-efficient factory, to produce a Canada-specific Model Y. This strategic move occurred in 2023, preparing for exports to the Canadian market.
The US automaker began shipping the Model Y from Shanghai to Canada in 2023, significantly increasing Canadian automobile imports from China. Imports through Vancouver, the country's largest port, rose by 460% to 44,356 units that year.
These shipments ceased in 2024 after Ottawa imposed 100% tariffs on Chinese-made EVs. Citing China's "intentional state-directed policy of overcapacity," Canada's move forced Tesla to switch to supplying Canada from its US and Berlin factories.
Tesla now ships Model Ys produced in Berlin to Canada, but more variants, including cheaper Model 3s, are primarily manufactured in China. Sam Fiorani, vice president of AutoForecast Solutions, suggested that this new agreement could enable a swift resumption of those exports.
Tesla already boasts an extensive network of 39 stores across Canada. In contrast, Chinese competitors such as BYD and Nio currently lack any sales presence in the country, giving Tesla a significant market foothold.
With only four core models, Tesla can likely execute marketing plans more rapidly than its Chinese rivals, which offer a wider array of models. Yale Zhang, managing director at AutoForesight, noted Tesla's flexibility in selling cars produced in any country to achieve optimal cost efficiency.
Before the previous tariffs, other brands exporting China-made cars to Canada included Volvo and Polestar. Both marques are owned by China's Geely automaking group, indicating prior market activity for China-produced vehicles.
The price clause, reserving half the quota for vehicles under CAD 35,000, is expected to benefit Chinese automakers. Fiorani stated that the primary beneficiaries would likely be Chinese car manufacturers and Canadian consumers seeking entry-level vehicles.
John Zeng, head of market forecast for China at GlobalData, believes the quota offers Chinese carmakers a chance to explore the Canadian market. This opportunity is particularly relevant given Canada's substantial Chinese Canadian population.
Canada aims to explore joint ventures and investments with Chinese companies over the next three years to develop a Canadian electric vehicle leveraging Chinese expertise. This initiative was reported by public broadcaster CBC, citing a senior Canadian official.
China's leading EV manufacturer, BYD, already operates an electric bus assembly plant in Ontario, Canada. This existing infrastructure could provide a foundation for further expansion into the Canadian market.
The former Biden administration quadrupled tariffs on Chinese EVs to 100% in 2024, effectively blocking such exports to the United States. Trump administration officials also criticised Canada's decision to open its market.
Canada will allow 49,000 Chinese-made electric vehicles annually, subject to a 6.1% tariff and a potential quota increase to 70,000 within five years.
Half of the import quota is designated for vehicles priced under CAD 35,000 (USD 25,189), a segment not currently met by Tesla models.
Tesla is strategically positioned to benefit due to its equipped Shanghai plant for Canada-specific Model Ys, its past export record, and 39 existing Canadian stores.
Source: REUTERS
Comments