Canadian government officials are debating whether to limit how much of the country’s 49,000-unit annual quota for Chinese-made electric vehicles any single automaker can claim.
The trade framework has drawn condemnation from Washington and domestic opposition since Prime Minister Mark Carney and Chinese President Xi Jinping agreed in January to replace the 100% surtax on Chinese-built EVs with a 6.1% tariff.
Bloomberg first reported the move on Thursday.
The government is now discussing whether to assign specific sub-allocations within the quota — effectively a quota within a quota — to ensure no one company dominates the program, officials told Bloomberg.
Zero Permits Used
There is also ongoing debate about what happens after the first tranche of permits expires on August 31.
Canada began accepting import permit applications on March 1.
Under the published framework, the first 24,500 vehicles can enter on a first-come, first-served basis through August 31, with a second allocation covering September through February 2027.
As of earlier this week, none of that quota had been used, according to a statement from Global Affairs Canada.
The agency said it will monitor the process to ensure equitable access to eligible applicants but did not provide further details.
Tesla and Polestar Move First
Tesla and Polestar — both of which have long-established Canadian sales networks and have previously imported Chinese-manufactured vehicles into the country — have been widely expected to be the first beneficiaries of the reduced tariff.
In early March, Tesla pulled Model 3 inventory from its Canadian website and began withdrawing demonstration vehicles from showrooms.
The move signaled a shift from its Fremont, California supply chain to Giga Shanghai — a route it briefly used in 2023 before the surtax shut it down.
Last week, the company slashed Canadian Model 3 prices across the lineup, with the new Premium Rear-Wheel Drive variant starting at C$39,490.
First customer deliveries are expected as early as this month.
The 6.1% tariff on Chinese-built vehicles is substantially lower than the 25% Section 232 national security tariff currently applied to US-made vehicles entering Canada, giving Tesla a strong financial incentive to source from Shanghai.
Geely-backed Polestar sold thousands of China-built Polestar 2 sedans in Canada between 2020 and late 2024 before the surtax forced the model off the market.
The brand told Automotive News Canada it is “still evaluating” whether to reintroduce the model under the new quota.
Polestar recently consolidated all global production of its Polestar 3 SUV at Volvo Cars‘ plant in South Carolina, ending Chinese manufacturing of the model.
Volvo — also owned by Geely — is also exploring whether to redirect Canadian sourcing of the EX90 SUV back to China.
The reduced tariff now reopens the Chinese supply path.
Geely Holding founder Li Shufu said in March that the group plans to build more vehicles in Europe using Volvo’s existing plants as part of a broader regionalization strategy.
Chinese Brands Entry
The government wants to ensure that a wide variety of companies have access to the import permits — including Chinese automakers that are effectively new to Canada’s consumer EV market, such as BYD, Chery and Geely — the latter already present in the country through its luxury brand Lotus.
All three have been confirmed for Canadian market entry by the end of 2026, but none is yet in a position to ship vehicles.
Homologation — certifying vehicles against Canadian safety and emissions requirements — remains the primary bottleneck.
BYD registered its Shenzhen and Xi’an passenger car plants with Transport Canada’s Appendix G preclearance registry in early March — the first Chinese-headquartered automaker to do so for consumer vehicles.
Chery has been the most visible in its pre-entry preparations.
The Wuhu-based company began hiring Canadian staff in January, filed trademark applications for several sub-brands, and confirmed it is “closely studying” the market.
Earlier this month, vehicles from Chery‘s export-focused Omoda and Jaecoo brands were spotted in Toronto for the first time.
Geely has also started hiring senior staff in Toronto through its Zeekr International division to launch the Geely Auto nameplate in Canada.
Thresholds Ahead
Lotus became the first Chinese-built passenger EV to formally launch in the country under the trade deal, introducing the Eletre SUV at C$119,900 — roughly half the price it would have carried under the previous 100% surtax.
The government has promised that within five years, half the quota will be reserved for vehicles priced under C$35,000 — a threshold that could ultimately favor Chinese brands with lower-cost lineups over Western automakers redirecting their Chinese production.
Chinese-built vehicles entering under the quota are not eligible for Canada’s C$5,000 federal EV rebate, which is restricted to models produced domestically or in free-trade partner countries.
Industry Minister Mélanie Joly said this week that the government is also developing a regulatory framework to protect personal data collected by EVs, responding to mounting concerns about surveillance risks posed by Chinese-built connected vehicles.
