Will Chinese EVs in Canada lead to lower car prices for Canadians?

Chinese electric vehicles are coming to the Canadian market this year after Prime Minister Mark Carney struck a new deal with China last week.  

China is home to some of the world’s most advanced electric vehicle companies, including BYD and Xiaomi. But until now, these cars were effectively barred from Canada, as the Canadian government imposed a 100% tariff on their entry.  

Beginning March 1, that tariff will be lowered to 6.1%. At first, only 49,000 vehicles will be allowed to be imported annually. However, after five years, the quota will rise to 70,000. 

Many Chinese EVs are more competitively priced than Western rivals such as Tesla. Chinese EVs benefit from lower manufacturing costs in their home country, after all. 

Which begs the question. As Chinese EVs enter the Canadian market, will they force their competition to lower prices as well? Will Canadian consumers benefit from cheaper vehicles?  

Clean Energy Canada, a think tank that advocates for electric vehicles in Canada, pointed out that the deal with China could open the door for more affordable electric vehicles in Canada beyond Chinese models.  

For instance, it points out that under current vehicle rules in Canada, many smaller European models are not available for sale in this country.  

“Last year, Clean Energy Canada highlighted the fact that Canada had only a single, not-very-competitive EV under $40,000—compared to 21 such vehicles sold in Europe,” said Rachel Doran, executive director of Clean Energy Canada, in a statement. “This approach will allow Chinese vehicles into Canada to compete in a very specific market segment, one that is underserved in Canada today.” 

But will the new deal decrease vehicle prices this year?  

The cost of vehicles in this country has become wildly unaffordable for many. According to AutoTrader, the average cost of a new car in Canada this year is $63,264,  with used car prices coming in at $36,911.  

Compare that with September 2018, when the price of new cars was $36,100 and $19,400 for used cars, according to Birchwood Credit. That means that prices are up 72% for new cars in just seven years, and a whopping 90% for used vehicles.  

Allowing cheaper Chinese vehicles will help, but their impact will likely be limited. After all, all these vehicles will be electric, which mean there won’t be downward pressure on the gas market for now — and the overwhelming majority of cars sold in this country are gas. The cap represents only three per cent of annual auto sales in Canada. 

Chinese vehicles will also still face a tariff of 6.1%, meaning that with the cost of shipping, they will not be sold as cheaply as they are in some other countries.  

But what may be more important is what this deal represents. If the Canadian government is more willing to loosen its rigid vehicle standards to open up the market to more models, including smaller European ones, this could be the start of more competition and lower prices for Canadians.