As Chinese EV makers have yet to announce their plans for Canada under the recently signed trade deal, established brands — such as Tesla — are already preparing to switch their imports to China-produced vehicles.
After announcing in early January that it would allow up to 49,000 Chinese EVs per year to enter Canada at a reduced tariff of just 6.1%, the country began accepting import permit applications on Sunday.
Under the new framework, the first 24,500 vehicles can enter Canada between March 1 and August 31 on a first-come, first-served basis.
Automakers already certified in North America are best positioned to benefit from the agreement, including Geely-backed Lotus, Volvo, and Polestar.
Volvo has confirmed its plans to take advantage of the quota, which would allow the company to reintroduce its flagship EX90 SUV in Canada after US imports were halted last year. Polestar is also considering applying.
Lotus, the only China-based EV maker currently in Canada, was among the first to comment on the deal, highlighting that it could cut the price of its Eletre SUV by half.
North American manufacturers are also positioning themselves to claim a share of the quota.
Tesla, which opened its first Canadian store in Toronto 14 years ago, could take a significant portion of it.
Tesla
The company currently produces all its S, 3, X, and Y models in the United States — although production of the flagship S and X is set to end, as the company shifts its focus towards robotics.
The best-selling Model 3 and Model Y are also manufactured in China.
The Giga Shanghai plant exports to the Asia Pacific (including Australia, New Zealand, Japan, South Korea, Thailand, Singapore, Malaysia, among others). It also supplies European markets.
While Canadian imports usually came from the US, the company began sourcing Model Ys from the company’s European factory last year to bypass tariffs — which could not be done for the Model 3 as the Grunheide plant only produces the SUV.
As of Monday morning, the option to configure a Model 3 had been removed from Tesla‘s Canadian website.
Additionally, it shows no Model 3s in inventory, while plenty of Model Ys are available for customers in Ontario, Toronto, or Vancouver, even considering distances of 200 km (124 miles).
Reddit user ‘Deep_Presentation725’ posted in r/teslacanada last week after visiting the local Tesla showroom to inquire about the Model 3.
The user said that Tesla had “quietly removed all the demos and new inventory from their lots and shipping them back to the USA.”
Tesla Canada, which usually imports its vehicles from the United States, briefly imported from China’s Giga Shanghai in mid-2023, as reported by Reuters.
These imports could resume as trade relations between Canada and the US show little sign of improvement, with the United States-Mexico-Canada Agreement (USMCA) facing challenges in the upcoming renegotiation.
Canada-China
Canada turned towards other international partners after its relations with its neighboring country weakened over trade policies.
According to the Government, more than 90% of Canadian-made vehicles and 60% of Canadian-made auto parts are currently exported to the US.
However — and despite the USMCA (free) trade conditions — the Trump Administration imposed tariffs on both Canada and Mexico last April.
Canadian parts that do not comply with the USMCA currently face a 50% tariff (including a 15% baseline duty and a 35% rate added last year) when imported to the US.
Canada has committed to maintaining 25% counter-tariffs on auto imports from the US, as it aims to “ensure a level playing field for Canadian automotive manufacturers in the domestic market.”
When announcing its strategy for the auto industry in early February, the Canadian government reaffirmed its intent to strengthen the automotive remission framework, aiming at forcing global carmakers to choose between local production and stiff surtaxes on imports.
The country’s current remission framework allows Canadian automakers to import a set of US-assembled vehicles tariff-free (as long as they’re USMCA-compliant), provided they maintain production levels and follow through on planned investments.
As of Friday, the Government began consultations with vehicle assemblers, parts producers, importers, workers’ associations, and unions, invited to submit their feedback until April 13.
