Canada’s decision to remove its 100% tariff on electric vehicles manufactured in China could give Elon Musk’s Tesla a strategic edge, even as the policy also opens the door for lower-cost Chinese automakers to enter the Canadian market.
According to a recent Reuters report, Canada will now permit the import of up to 49,000 Chinese-made EVs per year under most-favoured nation rules, subject to a 6.1% tariff. Prime Minister Mark Carney, who announced the move following a visit to China, noted that the annual quota could increase to 70,000 vehicles within five years.
Industry analysts believe Tesla is well positioned to move quickly under the new framework. The company had already begun exporting Canada-specific Model Y vehicles from its Shanghai factory in 2023. That plant is Tesla’s largest and most cost-efficient production hub globally, giving it a cost advantage over competitors.
Before Canada imposed steep tariffs in 2024, Tesla shipments from China helped drive a 460% year-over-year increase in Chinese auto imports through the Port of Vancouver, reaching more than 44,000 vehicles in 2023. After the tariffs were introduced—meant to counter what Ottawa described as China’s state-driven overcapacity—Tesla shifted Canadian supply to factories in the US and Germany.
With the new agreement in place, experts say Tesla could quickly restart exports from Shanghai. “This new arrangement could allow those shipments to resume fairly fast,” said Sam Fiorani, vice president at AutoForecast Solutions.
Tesla’s existing footprint in Canada further strengthens its position. The company already operates 39 retail locations nationwide, while Chinese brands such as BYD and Nio have yet to establish a direct sales network in the country. Tesla’s relatively simple product lineup—just four core models—also allows it to adjust production and distribution more easily than rivals with broader portfolios.
However, the policy includes a key limitation. Half of the import quota is reserved for vehicles priced below 35,000 Canadian dollars (about US$25,000). Since all current Tesla models exceed that threshold, the company may not be able to fully benefit from the quota.
That pricing rule is expected to favor Chinese manufacturers known for producing more affordable EVs. Analysts suggest brands like BYD and Nio could appeal to Canadian consumers seeking entry-level electric cars, particularly as they test demand in a market with a sizable Chinese-Canadian population.
Canada is also reportedly exploring partnerships with Chinese firms to develop domestically produced EVs within the next three years, potentially leveraging Chinese technology and expertise. BYD already operates an electric bus assembly facility in Ontario.
The policy shift has drawn criticism from US officials. Both the Trump and Biden administrations have taken a hard stance on Chinese EV imports, with the US raising tariffs to 100% in 2024—effectively shutting Chinese-made electric vehicles out of the American market.
