Tesla (NASDAQ:TSLA) is expected to be among the first carmakers to take advantage of Canada’s decision to roll back 100% tariffs on electric vehicles manufactured in China, helped by its early logistics planning from Shanghai and its established retail footprint in the country, industry experts say.
Under an agreement unveiled last Friday, Canada will permit imports of up to 49,000 China-built vehicles per year under most-favoured nation terms, applying a tariff of 6.1%. Prime Minister Mark Carney said the annual quota could expand to as many as 70,000 vehicles within five years.
One provision of the deal, however, reserves half of the quota for vehicles priced below 35,000 Canadian dollars ($25,189). Tesla’s current model lineup in Canada sits above that threshold.
Despite that limitation, Tesla retains a structural advantage. In 2023, the company upgraded its Shanghai facility — its largest and most cost-efficient plant worldwide — to produce a Canada-specific version of the Model Y. That same year, Tesla began shipping vehicles from Shanghai to Canada, driving a 460% year-on-year surge in Chinese-built vehicle imports into Vancouver, reaching 44,356 units in 2023.
Those shipments were halted in 2024 after Ottawa imposed 100% tariffs, citing concerns over what it described as China’s state-led overcapacity strategy. Tesla subsequently switched to supplying Canada from its U.S. and Berlin factories.
At present, Canada receives Model Y vehicles built in Berlin, while other variants — including lower-cost Model 3s — are predominantly produced in China.
“This new agreement could allow resumption of those exports rather quickly,” said Sam Fiorani, vice president of research firm AutoForecast Solutions.
Tesla also benefits from an existing network of 39 retail locations across Canada, unlike Chinese competitors such as BYD and Nio, which have yet to establish a direct sales presence in the market. Its relatively simple product lineup — just four core models — may also allow faster execution on marketing and logistics compared with rivals offering broader ranges.
“Tesla indeed has an advantage with its offering of a few models, versions and simple production lines so that it can be flexible to sell cars produced in any country in any markets to achieve the best cost efficiency,” said Yale Zhang, managing director at Shanghai-based consultancy AutoForesight.
Tesla did not immediately respond to a Reuters request for comment.
Other brands that previously exported China-made vehicles to Canada before the tariff increase included Volvo and Polestar, both owned by China’s Geely group. Neither company responded immediately to requests for comment.
Scope for Chinese EV brands
Even so, analysts say the pricing clause could open the door for Chinese manufacturers.
“The beneficiaries are likely to be Chinese automakers and the Canadian customers looking for an entry-level vehicle,” Fiorani said.
John Zeng, head of China market forecasting at GlobalData, added that the quota could also allow Chinese brands to test demand in Canada, which has a sizeable Chinese-Canadian population.
Canada is also exploring potential joint ventures and investment partnerships with Chinese firms over the next three years to develop a domestically produced electric vehicle using Chinese expertise, according to public broadcaster CBC, citing a senior government official.
China’s leading EV maker BYD already operates an electric bus assembly facility in Ontario.
The policy shift has drawn criticism from officials in the Trump administration. The former Biden administration similarly raised tariffs on Chinese EVs to 100% in 2024, effectively shutting them out of the U.S. market.