The Canadian government is considering blocking Chinese investments in domestic electric vehicle factories to protect the local industry and homegrown players.
Canada considers limits on Chinese EV production
According to Bloomberg, Prime Minister Justin Trudeau’s government is currently exploring several strategies to control the penetration of low-cost Chinese electric vehicles in the Canadian market.
Some of the options include imposing tariffs on China-made EV imports and blocking Chinese investment in new domestic factories.
According to the document published on Tuesday, the Canadian government seems to be currently only considering tariffs on finished models. For instance, the items under consideration for tariffs exclude batteries or battery components.
Notably, the proposal is part of the formal consultations the Trudeau government must complete before tariff imposition. These consultations will accept feedback from stakeholders such as labor unions and automotive industry groups until August 1, 2024.
Alleged subsidies for Chinese EVs
According to the recently released document, the Canadian electric vehicle industry is” “at risk of being undermined by the significant recent increase in exports of Chinese EVs to the Canadian and global markets, enabled by unfair support through China’s use of a broad range of non-market policies and practices.’
It further outlined the following Chinese policies that “artificially” reduce production costs:
- Pervasive subsidization, including the supply chains of necessary parts
- problematic or non-existent labor and environmental standards, etc.
These measures apparently result in a substantial overcapacity in Chinese electric vehicle production, potentially hurting the domestic market and its homegrown companies.
Open for feedback
The document has not yet outlined potential tariff rates as it still seeks feedback on what those may be for various electric vehicle classes. It also asks for stakeholders’ insights on how import tariffs could potentially affect EV affordability for customers.
It also emphasized the Canadian government’s concerns that “Chinese companies could seek to establish facilities to manufacture EVs within Canada” to “access the North American market in light of potential tariff measures.”
Therefore, the government still seeks feedback on whether “additional actions like further policy guidance, monitoring, or restrictions related to transactions and investment from Chinese sources in the Canadian EV supply chain are required.”
In addition, the paper intends to gauge people’s stance on whether the Canadian government should disqualify Chinese-made EVs from federal consumer incentives. It also seeks to address concerns about data privacy and security for connected EVs and infrastructures.
Notably, the majority of Canada’s imports from China are Tesla electric vehicles from the Gigafactory Shanghai.
Canada’s initiatives to protect its local industry echo the concerns of its allies, including the US and Europe. The US government raised import tariffs on China-made EVs from 25% to 100%. The EU also announced plans to impose major tariff hikes of up to 38.1% on top of the current 10% rate.
