An assembly line for Chinese electric vehicle maker Zeekr at a plant in Hangzhou Bay, China, on April 9.GILLES SABRIE/The New York Times News Service
A leading automotive sector executive who took part in consultations with Deputy Prime Minister Chrystia Freeland Friday says he expects Canada will impose “material” tariffs on Chinese-made electric vehicles and make these imports ineligible for federal government subsidies.
Flavio Volpe, president of the Automotive Parts Manufacturers’ Association, said Ottawa is also now probing concerns that these Chinese-made vehicles also pose a malware or spyware risk when they plug into or wirelessly connect to government- and industry-built public infrastructure in Canada.
Ms. Freeland met with leaders of the auto sector Friday in Toronto as part of continuing consultations about how to respond to what the Canadian government calls “unfair Chinese trade practices in electric vehicles.”
In late June, Ottawa signalled it might impose a surtax on imports of Chinese-made electric vehicles, which it said are being overproduced and flooding global markets. Currently, Teslas from China are subject to a 6-per-cent import tax.
Mr. Volpe said he thinks Canada will act shortly after 30 days of consultations end Aug. 1 and that Ottawa will apply a “very material tariff” that more closely approximates the American 100-per-cent tariff than the European Union’s measures.
U.S. President Joe Biden in May quadrupled his country’s tariff on Chinese-made EVs to 100 per cent. The European Commission, which oversees the European Union’s trade policy, earlier this month set provisional duties of up to 37.6 per cent on EVs imported from China.
Mr. Volpe said the glut of Chinese-made electric vehicles threatens to elbow out North American manufacturers just as China did with solar panel technology by “flooding foreign markets, subsidizing the cost of the commodity and collapsing foreign manufacturing capacity.
The auto sector leader said Chinese electric vehicles threaten Canadian government investments in its EV industry. Over the past few years, Ottawa, alongside the governments of Ontario and Quebec, have promised some $50-billion in subsidies to encourage foreign automakers, including Volkswagen, Stellantis and Honda, to build EV and battery manufacturing plants in the country.
“But I think we all agreed – industry and government here – that we need to push back and create the space for some of our investments to get some return before we give the market away to the Chinese,” Mr. Volpe said.
He also said he expects Canada to remove Chinese-made electric vehicles, including Teslas, from the list of vehicles eligible for federal incentives for consumers. “Are we helping to make those companies more competitive by leaving the door open here? I believe the answer is yes.”
Mr. Volpe said members of the industry including himself cautioned Ottawa about the potential for Chinese companies to collect data about North American electric-car consumers. Electric vehicles are packed with sensors and cameras and collect enormous amounts of data and Chinese regulations on privacy are different from Canada’s.
“It’s potentially spyware into every aspect of your life,” he said.
“I think the government is very intellectually curious about these capabilities and trying to understand whether they can do something about it before our market is saturated with that product.”
Navpreet Chhatwal, a spokesman for Ms. Freeland, said he couldn’t say what measures Ottawa would take. “The government is currently conducting consultations on potential policy responses to protect Canada’s auto workers and its growing EV industry from China’s unfair trade policies and practices and prevent trade diversion resulting from recent action taken by Canadian trading partners.”
China has warned of retaliation if Canada takes action on Chinese-made EVs. Mr. Volpe said he’s confident Ottawa is taking inventory of where Canadian industry might be vulnerable to retaliation but is not discouraged by this.
Chinese-made electric vehicles make up a small but growing portion of the Canadian EV market. Imports amounted to $2.2-billion in 2023, up from $84-million in 2022, according to Statistics Canada. So far, most of these vehicles are from U.S. automaker Tesla, which has a factory in Shanghai, rather than from Chinese companies.
Shanghai-based advisory firm Automobility has estimated that China has excess auto capacity of about 10 million vehicles a year, the equivalent of two-thirds of all North American output in 2022.
Higher tariffs do raise prices for consumers, creating trade-offs between the goal of protecting domestic workers and encouraging the mass adoption of EVs.
The government has set a goal of 100-per-cent new-car sales being EVs by 2035, but they currently only constitute around 10 per cent. A report from Bank of Nova Scotia, published last summer, suggested EV prices would need to drop by about one-third before they became affordable for the average family.
With reports from Reuters