The Tamesis
Canada’s move to eliminate 100% tariffs on Chinese-made electric vehicles could open the door for Tesla to become a beneficiary of Ottawa’s new trade deal with Beijing.
Experts say Tesla could be one of the first automakers to benefit from the deal, thanks to its early efforts to ship cars from its Shanghai factory and the fact that it has an established sales network in Canada.
Under the deal announced on Friday, Canada will allow imports of up to 49,000 vehicles per year from China and impose a 6.1% tariff on most-favored-nation terms. Canadian Prime Minister Mark Carney said the quota could increase to 70,000 vehicles within five years.
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However, under a clause in the agreement, half of the quota will be reserved for vehicles costing less than C$35,000 (US$25,189). Tesla models are priced higher than this figure.
While many Chinese automakers are eager to seize the opportunity to expand exports, Tesla has an advantage because it has equipped its Shanghai factory – the world’s largest and most cost-effective factory – in 2023 to produce and export a Canadian-only version of the Model Y.
That same year, the U.S. automaker began shipping cars from Shanghai to Canada, boosting Canadian vehicle imports from China to its largest port, Vancouver, by 460% year-on-year to 44,356 units in 2023.
But after Ottawa imposed 100 per cent tariffs, the company was forced to stop shipments in 2024 and instead ship from its U.S. and Berlin factories, citing a desire to fight back against what they said were practices China’s conscious state-led overcapacity policy.
The company now ships Model Ys produced in Berlin to Canada, but more models, such as the cheaper Model 3, are mostly made in China.
“This new deal could revive those exports very quickly,” said Sam Fiorani, vice president at research firm AutoForecast Solutions.
There are 39 stores in Canada
Tesla currently has a network of 39 stores in Canada, while Chinese competitors such as BYD and NIO have not yet established sales outlets in Canada, and Tesla may also speed up its marketing plans because it only has four core models, far fewer than its Chinese competitors.
“Tesla does have an advantage because it offers fewer models, versions, and simpler production lines, so it can flexibly sell cars produced in any country to any market, thereby achieving optimal cost efficiency,” said Zhang Yale, managing director of AutoForesight, a Shanghai-based consulting firm.
Tesla did not immediately respond to Reuters’ request for comment.
Other brands exporting Chinese-made vehicles to Canada before the tariffs took effect included Volvo and Polestar, both owned by Chinese automaker Geely.
Volvo and Polestar did not immediately respond to requests for comment.
BYD Ontario Bus Plant
However, price terms may give Chinese brands some breathing room.
“The beneficiaries are likely to be Chinese automakers and Canadian customers looking for entry-level cars,” Fiorani said.
Quotas may also provide an opportunity for Chinese automakers to test the waters in Canada, which has a large ethnic Chinese population, said John Zeng, head of China market forecasting at London-based consultancy GlobalData.
Canada hopes to consider establishing joint ventures and investments with Chinese companies within the next three years to build a Canadian electric vehicle with Chinese knowledge, the Canadian Broadcasting Corporation (CBC) reported, citing a senior Canadian official.
BYD, China’s largest electric car maker, currently has an electric bus assembly plant in Ontario, Canada.
Trump administration officials criticized Canada’s decision. The former Biden administration also quadrupled tariffs on Chinese electric vehicles to 100% in 2024, all but halting exports of such products to the United States.
- Reuters Additional editing by Jim Pollard
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