How Elon Musk’s Tesla may become a ‘winner’ in Canada PM Mark Carney’s ‘welcome note’ to Chinese auto industry
Canada has decided to remove 100% tariffs on Chinese-made EVs. According to a Reuters report, this policy change could benefit Elon Musk’s Tesla, which is positioned to be among the first electric carmakers to take advantage of the new arrangement. Under the deal announced last week, Canada will allow up to 49,000 vehicles to be imported annually from China, with a 6.1% tariff on most-favoured nation terms. Canadian Prime Minister Mark Carney, who recently visited China, also said the quota could rise to reach 70,000 vehicles within five years. The Reuters report cited experts who claimed that Tesla’s early efforts to ship cars from its Shanghai plant to Canada and its established sales network in the country give the company an advantage. However, under one of the clauses in the agreement, half of the quota will be reserved for vehicles priced under 35,000 CAD (roughly $25,000). It’s important to note that Tesla model prices are all above that number, and this could limit the company’s ability to fully utilise the quota.
How Canada’s Chinese EV policy change can help Elon Musk’s Tesla
While many Chinese automakers are eager to take advantage of this opportunity as they increase exports, Tesla has a head start. In 2023, the company already set up its Shanghai plant, which is its largest and most cost-effective factory worldwide, to build and export a Canada-specific version of its Model Y.
The US automaker started shipping the car from Shanghai to Canada that same year, increasing Canadian automobile imports from China to its largest port, Vancouver, by 460% year over year to 44,356 in 2023.However, Tesla was forced to stop in 2024 and switched to shipping from its US and Berlin factories after Canada imposed 100% tariffs, saying they wanted to counter what they called China’s intentional state-directed policy of overcapacity.Currently, Tesla ships Model Ys produced in Berlin to Canada, but more variants, such as cheaper Model 3s, are mostly built in China.“This new agreement could allow resumption of those exports rather quickly,” Sam Fiorani, vice president of research firm AutoForecast Solutions told Reuters.Tesla has an existing network of 39 stores in Canada, while Chinese competitors such as BYD and Nio do not yet have a sales presence there. Tesla can also likely move faster with marketing plans since it only has four core models, far fewer than its Chinese competitors, the report adds.“Tesla indeed has an advantage with its offering of a few models, versions and simple production lines so that it can be flexible to sell cars produced in any country in any market to achieve the best cost efficiency,” Yale Zhang, managing director at Shanghai-based consultancy AutoForesight, told Reuters.Other brands that exported cars made in China to Canada before the tariffs included Volvo and Polestar, which are both owned by China’s automaking group Geely.
How the price clause in Canada’s new EV policy is ‘good news’ for Chinese brands
However, the price limit will likely give Chinese brands some room to compete with Tesla.“The beneficiaries are likely to be Chinese automakers and the Canadian customers looking for an entry-level vehicle,” Fiorani added.John Zeng, head of market forecast for China at London-based consultancy GlobalData, said that the quota would also likely give Chinese carmakers a chance to test the market in Canada, where there’s a large Chinese Canadian population.Canada wants to explore joint ventures and investments with Chinese companies within the next three years to build a Canadian electric vehicle using Chinese expertise, the public broadcaster CBC reported, citing a senior Canadian official.China’s top EV maker, BYD, currently has an electric bus assembly plant in Ontario, Canada.Meanwhile, Trump administration officials have criticised Canada’s decision. The former Biden administration also increased tariffs on Chinese EVs to 100% in 2024, essentially blocking such exports to the US.
