Tesla emerges early winner as Canada welcomes Chinese EVs: Here’s why

Elon Musk-owned Tesla is set to gain early advantage as Canada has reached a landmark deal with China, pledging to remove 100 percent tariffs on Chinese-made EVs.

Under the deal announced last week, the previous 100 percent surtax is removed, returning Chinese EVs to 6.1 percent tariff on most-favoured nation terms.

Moreover, Canada will also allow up to 49,000 vehicles to be imported annually from China. Within five years, the quota is set to reach 70,000 vehicles, confirmed by PM Mark Carney.

How could Tesla gain advantage?

The deal is going to benefit Tesla as it has an established network of 39 stores in Canada unlike Chinese rivals like Nio and BYD.

In 2023, the US automaker equipped its Shanghai plant tailored to build and export Canada-specific versions of its model Y and Model 3, allowing for seamless transition back to Chinese sourcing from the more expensive Berlin and US plants.

One clause of the agreement reserved the half of quota for vehicles under 35,000 CAD. Fortunately, Tesla model prices are all above that number, giving resilience against the “price clause.”

“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.

The Trump administration slammed Canada for its decision of removing the tariffs and showing departure from the US protectionist policies.