The Canadian government is in talks to establish a joint-venture EV plant with Chinese automakers for global exports, Industry Minister Mélanie Joly told Bloomberg on Friday.
“We believe that these great Canadian champions can partner with Chinese EV companies to make a Canadian-Chinese car to export it around the world,” Joly said.
Canadian auto parts suppliers and manufacturers Magna International, Linamar, and Martinrea International — all of which have operations in China — could partner in a joint-venture assembly plant, Joly said.
Magna x XPeng
Magna already has a partnership with Chinese EV maker XPeng, assembling vehicles at its Graz, Austria facility.
The Canadian supplier began producing XPeng‘s entry level SUV G6 there last September and announced in January that it was expanding the partnership, adding another model to the two vehicles that had ben already announced.
“XPeng new P7+ will be assembled at Magna’s Graz, Austria facility, joining two existing XPeng models built there and further strengthening our growing partnership,” Magna said in a social media post on January 7.
The minister revealed there are “active conversations” on how domestic firms might complement new Chinese investment, including with Ottawa-based software developer QNX, owned by BlackBerry.
As reported by EV in late January, Joly confirmed meetings with the German giant Volkswagen Group, but also with two of China’s largest automakers BYD, and Chery.
“I already had meetings with different automakers,” Joly said on January 27, naming Hyundai, Volkswagen, BYD, and Chery as examples.
Recruiters working on behalf of Chery have contacted Canadian auto industry professionals on LinkedIn in recent weeks about roles to support the company’s expansion.
Addressing Security Concerns
The overtures to Chinese automakers represent a turnaround for Canada, which had previously said China was unfairly subsidizing its manufacturers while raising security concerns over vehicle technology.
Joly said those concerns could be addressed through software solutions and labor standards.
The US finalized a rule in the first weeks of 2025 — becoming effective March 17, 2025 — that prohibits the import and sale of connected vehicles with hardware and software linked to China or Russia.
In September 2024, then-Deputy Prime Minister Chrystia Freeland said Canada was “absolutely” considering following the US ban, stating the government takes “really seriously the security threat from China.”
On Friday, Moly said “We can find a way to have software in the car that will address the security concerns.”
“We think we’re able to have labor standards that are in conformity with what we accept and expect in Canada, and that there can be local supply chains in Canada that are created out of these investments,” the minister added.
Joly argued that a co-created EV could remain globally competitive despite Canada’s higher labor costs compared to China, pointing to Honda’s affordably priced Civic built in Ontario as an example.
“We can find a way to square the circle,” she said.
Part of Broader Trade Strategy
Canada’s pursuit of Chinese auto investment is part of Prime Minister Mark Carney’s broader trade truce with Chinese President Xi Jinping.
In January, China agreed to begin removing duties on Canadian agriculture products in exchange for Canada exempting up to 49,000 Chinese-built EVs annually from a 100% tariff imposed in 2024.
“It is expected that within three years, this agreement will drive considerable new Chinese joint-venture investment in Canada with trusted partners to protect and create new auto manufacturing careers for Canadian workers, and ensure a robust build-out of Canada’s EV supply chain,” the Canadian government said in a statement.
The Government announced this week a plan that includes revamping Canada’s counter-tariff approach to reward firms that maintain production in the country through a system of import credits — the more cars a company builds in Canada, the less it pays in tariffs on imported US vehicles.
“It is a way actually to compensate companies such as Honda and Toyota that are increasing their production in Canada,” Joly said. “It’s another way for them to make revenues.”
US Criticism
The Canada-China deal has drawn criticism from Ontario Premier Doug Ford, who warned it could jeopardize Canada’s trade relationship with the US — its largest export market for vehicles.
The US administration has also reacted negatively.
Commerce Secretary Howard Lutnick warned that renegotiations of the USMCA free-trade agreement could be affected, while Trump threatened to impose a 100% tariff on Canada — despite having first endorsed the agreement.
“If Governor Carney thinks he is going to make Canada a ‘Drop Off Port’ for China to send goods and products into the United States, he is sorely mistaken,” Trump wrote weeks later on social media.
South Korea Talks
Canada is also pursuing auto investment from South Korea.
The two governments recently signed a memorandum of understanding to promote industrial collaboration, including potential investment in automobile and battery manufacturing.
Joly noted that Quebec is the largest Kia market in the world.
“We’re definitely looking at car assembly plants,” she said. “Quebec is the biggest Kia market in the world. So we’re having conversations. Our goal is to create jobs and attract investment in the auto sector, so I think we are willing to look at different scenarios.”
Detroit Automakers Scale Back
The push for Asian investment comes as US automakers reduce their Canadian footprint.
GM has recently confirmed it will proceed with the previously announced layoff of 750 workers at its Oshawa plant, affecting an additional 1,500 jobs across the supply chain.
The company also halted BrightDrop production at CAMI Assembly, impacting over 1,000 jobs.
In response, the Canadian government imposed reductions to annual remission quotas on imported vehicles for GM and Stellantis, calling their decisions to scale back manufacturing “unacceptable” and a “direct breach of their commitments to the country and Canadian workers.”
Stellantis announced on Friday a €22 billion ($26 billion) hit as it overhauls its EV strategy sending its shares to their worst day ever.
The stock plunged by 23.7% to $7.28, reaching a new low since April 2020.
