Clean Energy Canada | Not everyone can afford a $50,000 car. Our leaders should remember that before hitting Chinese EVs with sky-high tariffs
July 5, 2024

Last week, Canada kicked off a 30-day consultation to determine whether and what sort of tariff or trade measures it will impose on Chinese-made EVs. And while auto groups are advocating for a large, tariff, Canada lacks the trade heft of the U.S., putting it between the proverbial rock and a hard place.

The federal government, after determining whether any trade rules are being broken, must find a sweet spot. Our current tariff on Chinese EVs is 6 per cent, a far cry from America’s aggressive new 100 per cent tariff but still lower than the one the EU is considering of between 17 and 38 per cent. What’s more, hiking Canada’s tariff might violate international trade law and could draw retaliation from China.

Certainly, we must protect Canada’s own burgeoning EV industry, a sector that could employ 250,000 Canadians by 2030, while navigating two economic giants that also happen to be our two largest trading partners. But there is another consideration that’s no less important: improving access to affordable EVs as Canadians struggle through a cost-of-living and climate crisis.

While EVs save drivers money in almost every situation, thanks to significantly lower fuel costs, there are still too few affordable EVs on Canadian dealer lots. An inelegant trade move could result in even fewer models and higher prices for Canadian consumers.

Consider the Chevrolet Bolt. With a $40,000 sticker price made even lower with government rebates, the Bolt has made EV ownership possible for many Canadians. The Bolt is Canada’s third-best-selling, with over twice as many sales last year as any non-Tesla EV in the country, and its success demonstrates the appetite of consumers for affordable EVs. The problem? Production of the Bolt was halted last year until model year 2026.

Now, America’s new tariff is making things even harder for the money-minded consumer. Sales of the Chinese-manufactured Volvo EX30 — a compact new EV that was Europe’s third-best-selling electric model last month — have been delayed in the U.S. until 2025, almost certainly because of the tariff. The EX30 would have competed with the Bolt, but it appears Americans will have neither option for a while.

Current EV sellers Tesla and Polestar could be collateral damage, too, as both manufacture cars for the Canadian market in China, including Tesla’s more affordable Model 3. As BloombergNEF concluded in its most recent EV outlook, “Tariffs and further protectionist measures could slow down global EV adoption in the near term.”

Other trade measures, including restricting Chinese content in EVs eligible for incentives, aren’t without risks either. While there are more than 50 rebate-eligible EV models available in Canada today, looking at what we’ve seen in the U.S. with their regional content requirements, that number could be drastically reduced. Only a small fraction of available EVs in the U.S. are currently rebate-eligible, and that number has declined.

It’s worth remembering that all EVs produce less carbon over their lifetime than gas cars, regardless of their country of origin. As such, any policy that unreasonably slows the rate of EV adoption also slows climate progress. With an electricity grid that’s over 80 per cent non-emitting and transportation emissions that are significant and growing, Canada cannot seriously tackle climate pollution without a lot more EVs on the road.

And yes, Canadian-made EVs could be cleaner still than those made in China with more direct benefits for the Canadian economy. Besides the lone Chrysler Pacifica plug-in minivan, most of these cars aren’t slated to hit the market until 2027 or 2028, and we must not penalize consumers and slow our climate efforts in the meantime. Instead, we should look to give Canadian-made EVs a boost as they come to market.

In addition to timing, Canada must also consider where along the supply chain a tariff applies. Tariffs on final assembly would impact Volvo and Tesla, but many North American automakers still rely on Chinese-made components, including batteries, in their supply chains. Slapping tariffs on these could have further cost implications for Canadian consumers.

There are other ways to help our EV sector and make EVs more affordable for Canadians. Canada should refund its EV rebate program to keep it running until 2027 and 2028 when more Canadian-made vehicles start rolling off assembly lines. Ontario, where much of this assembly takes place, still has no provincial rebate in place; it should queue one up now to benefit homemade EVs when they hit the market.

Thankfully, this decision isn’t black or white. There is a menu of options to help address valid concerns around Canadian workers, competitiveness, and affordability. But whatever we do, our response must be crafted in a way that makes our auto industry — and EV prices — more competitive, not less. And we must not forget about the people buying the cars.

This post was co-authored by Mark Zacharias and originally appeared in The Toronto Star.