Financial Observer: Canada cuts tariffs, 'opens doors for Chinese trams'
Editor's note: "Canada has opened its doors to Chinese electric vehicles." The Globe and Mail reported on the 19th that Canadian Prime Minister Carney recently announced a major adjustment to China's electric vehicle import policy. Canada will no longer impose a 100% surtax and will provide an annual quota of 49000 vehicles, with a 6.1% most favored nation tariff treatment within the quota. According to Bloomberg, the Canadian government is developing a new automotive industry development strategy aimed at providing broader market access opportunities for companies producing cars in the country. The report believes that this move is a retaliation against the current US government's pressure on car manufacturers to relocate their factories from Canada to the United States, and also opens the door for Chinese car manufacturers to assemble cars in Canada for the first time. Multiple policy adjustments in Canada have triggered positive reactions from car companies and the market, and industry experts have stated that 'this is undoubtedly a significant positive development'.
49000 vehicles quota: 'Exploring market opportunities'
On the afternoon of the 16th, Carney announced the cancellation of tariffs on Chinese electric vehicles at a press conference held in Beijing. According to Highway and Track magazine, Carney stated in a statement that it is expected that within three years, the agreement will encourage Chinese companies to engage in a large number of joint ventures with reliable Canadian partners, creating new job opportunities for the country's automotive industry and supporting the steady development of Canada's electric vehicle supply chain. In addition, the agreement aims to introduce more affordable electric vehicles to Canadian consumers. According to the agreement, over 50% of these imported vehicles will be affordable models within 5 years, with import prices below CAD 35000 (1 CAD is approximately RMB 5), providing Canadian consumers with more low-priced car purchasing options
According to The New York Times, starting from October 1, 2024, the then Trudeau government in Canada followed the Biden administration in imposing a 100% surtax on Chinese electric vehicles. Before the imposition of additional taxes, the tariff rate for Chinese made electric vehicles exported to Canada was 6.1%; After the additional tariffs came into effect, the comprehensive tax rate increased to 106.1%.
After the tariff adjustment, the quantity of electric vehicles imported by Canada from China also changed accordingly. According to data from Statistics Canada, in 2023, the amount of electric vehicles imported from China to Canada soared from less than CAD 100 million in 2022 to CAD 2.2 billion, with an import volume of approximately 44400 vehicles, mainly Tesla Model Y. After the tariff increase in October 2024, the above figures have significantly decreased. According to data, in the fourth quarter of 2024, China's exports of electric vehicles to Canada plummeted by 92% month on month.
Sun Xiaohong, Senior Expert of the Automotive Internationalization Professional Committee of the China Chamber of Commerce for Import and Export of Mechanical and Electrical Products, stated in an interview with Global Times that after the Canadian government followed the United States in imposing 100% tariffs on Chinese electric vehicles in 2024, this measure sent the wrong signal to cooperation between the two sides. Chinese electric vehicles themselves are very suitable for Canadian consumers in terms of price, performance, etc. They were originally in a good development trend, but were forcibly interrupted. Currently, the Carney government has cancelled the previous 100% tax increase, which is undoubtedly a significant positive development.
According to the Financial Mail of Canada on the 17th, the Carney government has promised to certify models from Chinese car companies such as BYD, and these brands may gradually occupy more import quotas in the future. Canadian television quoted John Zeng, the head of China market forecasting at consulting firm GlobalData, as saying that the annual quota of 49000 vehicles provides an opportunity for Chinese car manufacturers to explore the Canadian market.
On the 17th, Lotus Sports Car, which was acquired 51% of the shares by Zhejiang Geely, expressed high concern and welcome for the latest tariff policy announced by the Canadian government. Lotus Sports stated that this milestone policy adjustment not only marks a positive development in China Canada trade relations, but also strongly promotes Lotus Sports' further development in the North American market.
Chinese brands will occupy approximately 10% of the Canadian market share
For this tariff adjustment, the British Broadcasting Corporation (BBC) reported that some experts said that the provisions related to electric vehicles in the trade agreement will help Chinese car companies enter the Canadian car market. Montreal McGill University Business School professor Vivek Astfanche said that with the reduction of tariffs on electric vehicles, "it is expected that Chinese car brands will occupy about 10% of the Canadian electric vehicle market".
Industry associations and professionals in Canada have also responded positively to this. Daniel Brayton, President and CEO of the Canadian Electric Vehicle Association, said in an interview with Canadian media, "A few days ago, the President of the United States publicly stated that he does not want any cars manufactured in Canada to be sold in the United States, which means he is threatening the entire Canadian automotive industry. So I think Prime Minister Carney's policy adjustment is timely because we must find new partners, whether from China, Japan, South Korea, or Europe. For 60 years, Canada has relied on the United States based on agreements in the automotive industry, but now the situation is rapidly changing. So I believe that the 49000 Chinese made electric vehicles that are about to enter the Canadian market are the first step in the right direction
According to the Canadian Broadcasting Corporation (CBC), Morris, a sales manager at a car company in Burlington, Ontario, said that consumers have a demand for more affordable and environmentally friendly electric vehicles. For ordinary consumers, the emergence of Chinese electric vehicles in the market means "more choices" and "more advanced technology".
Canadian environmental groups have also shown a considerable degree of agreement. Some environmentalists have pointed out that Canada had previously set legally binding sales targets for zero emission vehicles for car manufacturers, but due to slowing sales and industry pressure, the originally planned goal of achieving 20% by 2026 has been postponed. In an interview with CTV News, Devin Arthur of the non-profit organization EV Society said, "Overall, I think this is positive. Having more choices in the market will bring better competition, prices will come down, and this will make cars affordable for every Canadian
In terms of electric vehicle prices, CBC reports that compared to popular models of the same size and range in the Canadian market, Chinese electric vehicles are usually priced between $10000 to $15000 lower. Currently, the price of electric vehicles is still 30% to 50% higher than that of gasoline vehicles in the same class, and reducing trade barriers will effectively alleviate the pressure on consumers' purchasing costs, "said Rashtoff, associate professor at the De Groot School of Business at McMaster University in Canada
According to reports, brands that have exported Chinese made cars to Canada before the implementation of the surtax in October 2024 include Tesla, Volvo, and Polestar. This indicates a clear demand in the Canadian market for more affordable Chinese made electric vehicles. A survey conducted by Abacos Data last year, commissioned by the Canadian Clean Energy Organization, also confirmed this point: the majority of Canadians (53%) support reducing tariffs on Chinese electric vehicles to enhance consumer purchasing power, and 29% of respondents even hope to completely eliminate related tariffs.
Regarding when Chinese electric vehicles will arrive in Canada, CBC stated that "there is currently no exact timetable and it is not known which models will be launched," but Associate Professor Rashtoff from McMaster University's De Groot School of Business said that vehicles may arrive at Canadian ports within a few weeks because Chinese electric vehicle manufacturers can quickly increase production and ship quickly, and BYD even has its own cargo ships, which can further shorten transportation time. He said he wouldn't be surprised if the new electric vehicles from China arrived as early as March or April.
New policies will be introduced to attract investment from Chinese car companies
CBC reported that the Canadian government is developing an automotive industry strategy, expected to be released in February, aimed at supporting the development of the country's automotive industry with 125000 employees and ultimately achieving a "catch-up" with the United States. A Canadian official stated that the Canadian government plans to provide better market access for companies that produce cars domestically in Canada, while those that import assembled cars from overseas will not receive the same treatment. In addition, foreign car manufacturers who are unwilling to build factories and produce cars in Canada will face relatively unfavorable terms and conditions.
Bloomberg commented on the policy being drafted, stating that this measure directly responds to the Trump administration's attempt to persuade car manufacturers to relocate their factories from Canada to the United States. In the past year, General Motors has closed a factory in Ontario and threatened to cut production at another factory; However, Strantis cancelled the plan to produce Jeep models at a factory near Toronto and transferred production to Illinois, USA.
According to Sun Xiaohong's analysis, in 2025, the US government will implement a series of tax increases on automobiles and their components, which will also apply to Canada. As a result, many car companies that originally produced in Canada have shifted their production capacity to the United States, leading to a production capacity gap in Canada. Therefore, the Canadian government is actively seeking automotive companies from around the world to invest in Canada, including China.
It is worth noting that the new policy has opened the door for Chinese car companies to assemble cars in Canada for the first time, while also setting restrictions, including requiring the use of Canadian software and establishing joint ventures with local companies.
The new policy may reshape the landscape of Canada's automotive industry. According to foreign media analysis, Canada is the largest importer of American made cars. At present, many large car companies, including Tesla, Nissan, and Kia, have not set up factories in Canada and rely entirely on factories in the United States and other regions to supply the Canadian market. Although Canada does not yet have its own independent automotive brand, it has a thriving automotive parts manufacturing and vehicle assembly industry. According to the Canadian Automobile Manufacturers Association, over 1.5 million cars were assembled in Canada in 2023, with the majority sold to the United States.
Therefore, Sun Xiaohong believes that in the future, cooperation between China and Canada in the automotive field may not be limited to trade, and investment may also become the main way, especially in local investment in assembly and production. As a member of the US Mexico Canada Agreement, over 80% of Canada's trade is related to the United States, and overall it is still influenced by the United States. Despite the efforts of the Carney government to promote diversity, its relationship with the United States remains the foundation of its policy. In this context, cooperation with Chinese electric vehicle companies is more meaningful: China has significant advantages in new energy vehicle technology and industry chain, and can provide the Canadian market with a rich and cost-effective selection of vehicle models. The Canadian market has a large scale and is attractive to Chinese companies.
In addition to direct exports, there is a high possibility for Chinese car companies to invest in assembly in Canada. "Sun Xiaohong further stated that China may focus on Canada's policy details, especially the stability and safety of the investment environment. She hopes that market behavior will not be affected by political interference, and relevant policies can be recognized by parliament to avoid fluctuations due to government changes, thus providing a continuous, stable, and predictable market environment for Chinese companies. This is crucial for the long-term healthy development of cooperation between both parties.