Tariff on Chinese-made EVs will help level the playing field, say industry experts
The new tax will help Canadian makers — including those in Windsor — catch up in terms of cost
Automotive industry experts say a 100 per cent tariff on Chinese-made electric vehicles will help EV makers in Canada — and Windsor — catch up to China's low-cost cars.
Prime Minister Justin Trudeau announced details about the new tax, which will go into effect on Oct. 1, at the federal cabinet retreat in Halifax on Monday. He also announced a separate 25 per cent tax on steel and aluminum made in China, which will go into effect on Oc. 15.
"We are transforming Canada's automotive sector to be a global leader in building the vehicles of tomorrow, but actors like China have chosen to give themselves an unfair advantage in the global marketplace, compromising the security of our critical industries and displacing dedicated Canadian autos and metal workers," Trudeau said.
"So we're taking action to address that."
This comes after U.S. President Joe Biden quadrupled his country's import tariff on Chinese-made EVs to 100 per cent months ago, citing unfair subsidies from Beijing to Chinese EV makers.
Chinese brands are not a major player in Canada's EV market right now, but imports from China have exploded in the last year after Tesla switched from U.S. factories to its manufacturing plant in Shanghai for its Canadian sales.
Chinese EV giant BYD, which stands for Build Your Dreams, established a Canadian corporate entity last spring and has indicated it intends to try and enter the Canadian market as early as next year.
Flavio Volpe, president of the Automotive Parts Manufacturers Association, welcomed the move as his organization has pushed heavily for this tax on Chinese automakers.
"We made the case that if we did nothing with the Chinese oversupply and their strategy to dominate the overseas markets … that all of the investments that we've made together, industry and government, in Canada over the last couple of years especially, weren't going to bear any fruit," said Volpe.
But, because electric vehicle manufacturing in China is highly subsidized and labour there is cheaper, he also says the 100 per cent tax can only help the homegrown industry so much.
"I also think it's incumbent now on the Canadian sector to take this time that the government has bought for us and come back with innovative, efficient, cost friendly options for Canadians," said Volpe.
Joe McCabe, auto industry analyst firm AutoForecast Solutions, agrees, saying EVs from China can sweep North American competition when it comes to the price. The Seagull by BYD starts at about $14,600 Cdn inside China. Most EVs for sale in Canada start around $40,000, by comparison.
"That's where China can beat everyone today," said McCabe. "As … competition across North America increases, prices will become more competitive."
While the move helps level the playing field for now, it's only buying time for North American auto makers to catch up to those in China, according to McCabe.
"We see this as a raising of the hurdle, not a barrier. The Chinese [manufacturers] are going to come regardless. It's not if, it's when," said McCabe, adding that even with the 100 per cent tariff some particularly cheap EVs could be competitive in the Canadian market.
Rakesh Naidu, president and CEO of the Windsor-Essex Regional Chamber of Commerce, says that the announcement is good news for the local auto industry especially.
"I think we should be happy," Naidu said. "And I think this ensures that our [EV] industry will have the runway to really go from the nascent stages right now into a full, mature industry."
Volpe agrees that southwestern Ontario's plants, including NextStar, Stellantis, Ford and more, all stand to benefit from the move.
"Those are all plants and companies who were under threat from having to compete with a Chinese product," said Volpe. "They're a little bit safer now."
Naidu says in a market like Windsor-Essex, where cross-border collaboration in the auto industry is so key, it's important for the companies here to continue to work together with their American counterparts.
"We've always done a great job in terms of collaborating and working with … American friends on the other side of the border," said Naidu. "If we do this right … we will continue to be a major force."
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With files from Dalson Chen and the Canadian Press