• Chinese EVs account for over 50% of EVs sold in Europe
• Chinese EVs offer lower prices and better technology than their global competition
• The day might come when Chinese brands are building EVs in Canada
• It’s tough to compete against automakers that chase market share over profitability

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Depending on whom you ask, the outcome of Chinese electric vehicle automotive brands coming into the Canadian marketplace is either the beginning of the end of our domestic automotive manufacturing business or the solution to wide-scale adoption of EVs in our country, and with it a reduced carbon footprint.

Chinese automakers sell EVs around the world, but notably not in North America, where both Canada and the United States have imposed 100% tariffs. The European Union has a 38% tariff, but that hasn’t stopped Chinese EVs from dominating that market with the share of Chinese-made EVs jumping from just one percent in 2019 to over 50% in 2023. The appeal of EVs from such Chinese brands as BYD, Nio, Aito and Wuling HongGuang is twofold: lower prices and better technology than their global competition. The very popular BYD Song starts at 24,398 Euros (CDN$36,618) while the Tesla Model Y starts at 43,970 Euros (CDN$65,993). And Chinese firms have favoured lithium iron phosphate (LFP) chemistry in their batteries, that is safer and less expensive than the lithium nickel manganese cobalt (NMC) blends Western automakers use. That is changing, with automakers like Ford committing to building a LFP production facility, but for the time being Chinese EV automakers are the battery tech leaders.

Why is China so dominant in the EV sector?

China has distinct advantages in producing electric vehicles. It has highly localized supply chains that reduce logistics and transportation costs, low labour costs, low material costs, advanced technology, robust investment and economies of scale. Hourly wages for assembly line workers in China begin at US$4.20, while their North American counterparts start at US$29. Battery prices are 24% lower in China than in North America, and Chinese automakers also utilize a massive robotic workforce in EV production. Industry watchers have pegged Chinese EV makers with a 30% faster rate of technological innovation. China’s domestic output this year is expected to eclipse 35 million vehicles. Last year, just under 90 million vehicles rolled off global production lines. Canada accounted for less than two million of those, while the United States between 10 million and 11 million.

All these factors play a significant role in Chinese automakers’ abilities to produce less expensive yet technologically superior EVs than their global counterparts. However, the biggest reason they enjoy this advantage is the billions and billions of yen the centralized Chinese government has provided in subsidies, accounting for a reported US$30 billion since 2009. In addition, over US$72 billion in sales tax breaks have spurred Chinese EV production. This government support was cited by the Trudeau and Biden administrations as the main reason for implementing the 100% tariff on Chinese-built EVs.

Why we shouldn’t let Chinese EVs into Canada

Those 100% tariffs certainly smack of protectionism, and that’s certainly at the core. In a recent Financial Post story, Canadian Vehicles Manufacturers’ Association president Brian Kingston said: “(Tariffs) were put in place because there was a clear recognition that our automotive sector cannot be undermined by a subsidized Chinese sector, and efforts were taken to make sure Canada was aligned with the U.S.”  The lobby group spokesman added he expected the tariffs on Chinese vehicles to remain in both countries.

Plugged In podcast: Six auto execs’ takes on EVs in Canada

It should be noted that when Kingston says “undermined,” what he really means is “destroyed.” That’s certainly the belief of many on the pro-tariff side, maintaining that a flood of inexpensive Chinese EVs into Canada would pose an existential threat to our domestic automotive manufacturing business. Of course, the U.S. president’s recent tariff rumblings offer a similar possibility, but there is the hope that he’s only banging the negotiation drum.

As to how long we should have tariffs on Chinese EVs, auto execs and industry insiders I’ve spoken with on my Plugged In podcast figure five years should be enough time for Western automakers to draw even with their Chinese counterparts in terms of pricing and technology. BYD CEO Wang Chuanfu, seems to agree with this time frame, telling China’s national television broadcaster this past week that Chinese electric vehicles are “three to five years ahead in terms of products, technology and the industrial chain.”

And then there is the question of security. We all remember back in 2023 when the Canadian government banned Chinese telecommunications giant Huawei from installing 5G network equipment within our borders. Canada was the last of the Five Eyes intelligence-pooling alliance to do so, on the grounds that it opened a very real possibility of state-sponsored cyberespionage. Well, there’s a line of reasoning that Chinese EVs should be banned for a very similar reason. George S. Takach is an expert on technology and the law, and in a recent Globe & Mail op-ed warned about the perils of EVs from China. “The typical EV, whether made in China or elsewhere, has about a dozen cameras, a similar number of ultrasonic sensors and radar, and literally several thousand semiconductor chips that operate software and collect and process vast quantities of data, including geolocation information. A foreign government getting access to this tech environment — or a foreign hacker — could find out all sorts of things about drivers, their environs, their contacts and their employers.”

For its part, China has banned Western tech behemoths Facebook and Google, and in 2021 forbid government employees from driving their Teslas to work, citing security concerns surrounding military bases and research campuses.

Why we should let Chinese EVs into Canada

Read or listen to any EV expert talk about EV adoption in Canada, and the primary hindrance is cost. The price differential between a comparable gas-powered and electron-powered vehicle hovers around the $15,000-$20,000 mark. The long-anticipated price parity scenario has not yet arrived, slowing the take rate of electric vehicles in Canada, particularly as the next conquest group is not tech-savvy, early adopters. And with government rebates and incentives stalled or outright cancelled, the cost of an EV in Canada remains the deal breaker for many otherwise interested drivers.

The holy grail of the EV segment circa 2025 is a 400-kilometre range vehicle with a sub-$40,000 price tag. The only EV on sale in Canada below that price threshold is the Fiat 500e, but with a somewhat anemic range of just 227 kilometres. However, and as noted above, such holy grails do exist. Canadian EV advocates make the case that if Chinese EVs were allowed into the country, EV adoption would skyrocket, and that that otherwise unlikely scenario of hitting the government-imposed 2035 EV sales mandate of no new gas-powered vehicles would be revived.

There’s also the argument that keeping Chinese EVs out of North America slows the innovation of domestic automakers as they don’t need to worry about competing with the technologically advanced Chinese EVs. So, while the Chinese EVs will continue to advance, the electric vehicles from the likes of Ford and GM will flounder in a sea of mediocrity.

Final Thoughts

I’ve said it before and I’ll say it again, we are living through fascinating times in the world’s automotive sector. Disruptive and uncertain to be sure, but also wondrous and exciting, as emerging technologies promise to offer a safer, cleaner and more enjoyable driving future. One of the most interesting, if not unsettling, aspects of the rise of Chinese automobiles is a possible future of companies like BYD setting up factories in Canada to build their electric vehicles. Such a scenario seems fantasy, but a case could be made that if and when the current U.S. administration asphyxiates our domestic automotive manufacturing base, why wouldn’t we want the jobs and investment a BYD might bring to the table if the automaker began buying up and retooling shuttered factories in Alliston, Cambridge, Oakville, Oshawa and Woodstock?

It should be noted that the BYD Seagull has a price of just US$12,000 in China, meaning even with a 100% tariff it represents a very inexpensive EV, so it seems that it isn’t an if but a when that you’ll see Chinese electric vehicles on Canadian streets.

Chinese EVs aren’t going away, and with Chinese companies chasing market share and not profitability, at least for the foreseeable future, the debate of if and when we should lower the tariffs is only getting started.

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