Under the agreement announced last Friday, Canada will permit up to 49,000 EVs imported from China each year at a reduced tariff rate of 6.1%, aligned with most-favoured-nation rules. Prime Minister Mark Carney also indicated the quota could rise to 70,000 vehicles within five years.
However, a key restriction could limit Tesla’s share: half of the quota is reserved for vehicles priced under 35,000 Canadian dollars ($25,189). Tesla’s lineup currently sits above that threshold.
Still, analysts believe Tesla may still capture early advantage, because it already has the infrastructure and experience needed to restart China-based exports quickly. In 2023, Tesla adapted its Shanghai factory — the company’s largest and most cost-efficient global plant — to produce a Canada-specific Model Y and began shipping the model to Canada.
That move drove a 460% year-over-year surge in Canadian imports of Chinese-built automobiles, rising to 44,356 vehicles in 2023, with the port of Vancouver emerging as a key entry point. However, Tesla halted those shipments in 2024 after Ottawa imposed 100% tariffs, citing concerns about China’s state-backed industrial capacity.
Tesla has since shifted Canada-bound deliveries to Model Ys produced in Berlin, while cheaper Model 3 variants remain predominantly made in China.
“This new agreement could allow resumption of those exports rather quickly,” said Sam Fiorani, vice president at AutoForecast Solutions.
Tesla’s established presence in Canada may also accelerate its advantage. The company operates 39 stores nationwide, compared with no Canadian retail footprint yet from major Chinese rivals such as BYD and Nio. Analysts note Tesla’s relatively simple product line—just four core models—could allow it to quickly adapt marketing and distribution strategies.
“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.
Chinese EV Brands Still Stand to Gain
Even with the price cap limiting Tesla’s share, the new agreement could still open the door for Chinese EV makers to expand in Canada.
“The beneficiaries are likely to be Chinese automakers and the Canadian customers looking for an entry-level vehicle,” Fiorani said.
Industry observers also suggest the quota could offer Chinese automakers a chance to test the Canadian market, which includes a significant population of Chinese Canadians.
Canada is reportedly exploring joint ventures and investments with Chinese companies to develop an EV locally within the next three years, according to CBC, citing a senior Canadian official. China’s top EV maker BYD already operates an electric bus assembly plant in Ontario.
Volvo and Polestar—both owned by China’s Geely—also previously exported Chinese-built EVs to Canada before tariffs were introduced. Both companies declined to comment.
Political Fallout
The move has drawn criticism from U.S. officials. The Biden administration, like the Trump administration before it, imposed 100% tariffs on Chinese EV imports in 2024, effectively blocking Chinese EVs from entering the United States.
As Canada moves forward, analysts say Tesla’s existing supply chain and market presence could make it one of the first major winners of the new tariff framework—despite the new price cap aimed at favoring lower-cost vehicles.