Canada’s EV deal with China could hand nearly $1 billion to Chinese automakers from federal credits, experts warn

When Prime Minister Mark Carney’s government agreed to allow up to 49,000 Chinese-made electric vehicles (EVs) into Canada at a steeply reduced 6.1 percent tariff, down from 100 percent, much of the media coverage focused on cheaper EVs, consumer choice, how the Chinese government subsidizes its car companies, and how Canada was exercising its sovereignty. What was largely lost in the conversation is that the Canadian government could be subsidizing the Chinese cars sold in Canada at nearly $1 billion per year, via Canada’s zero-emission vehicle (ZEV) credit system. “At 49,000 vehicles a year, that’s about $980 million annually in credit generation,” Brian Kingston, president of the Canadian Vehicle Manufacturers’ Association (CVMA), told The Hub. “You sell the car to the consumer, and then you turn around and sell the credit that you’ve generated from that sale to a manufacturer. You’re effectively selling the same car twice.” The Canadian government’s regulatory system on the percentage of sales of emission vehicles would effectively create a massive new subsidy stream for Chinese automakers operating in the Canadian market, according to Kingston and other experts. Domestic automaker competitors selling gasoline and hybrid vehicles could ultimately foot the bill. Under Canada’s federal ZEV mandate—which is currently under review and was suspended for 2026 by the Carney government last fall—automakers have to hit targets where a rising share of their sales must be EVs to lower emissions. In 2026, the first year quotas were supposed to be compulsory, 20 percent of cars sold from a car company under the mandate would have had to be EVs. By 2035, 100 percent would need to be EV under the current ZEV program’s targets. Companies that fall short of the ZEV mandate would have to purchase credits from firms with surplus EV sales. Ottawa set the notional value of a credit at $20,000, based on the cost of installing charging infrastructure. Actual market prices of credits are negotiated privately. “It makes no sense,” Kingston said. “The federal government is creating a revenue line for Chinese-headquartered companies at the expense of Canadian companies.” A hidden wealth transfer to Chinese automakers? Former Toyota Canada vice-president Stephen Beatty also finds the most troubling part of the Chinese EV deal is the unfair playing field Chinese car companies would have if the suspended credit system isn’t scrapped. “If every one of those vehicles generates a ZEV credit,” he said, “you’re talking about a massive hidden economy.” Even using Beatty’s most conservative credit value of $7,000 per vehicle, 49,000 imports would still equate to more than $340 million annually in regulatory income for Chinese automakers, paid indirectly by Canadian automakers and, ultimately, Canadian consumers. “You’re going to be transferring wealth to China,” Beatty said. Both automaker experts argue that Ottawa has not yet communicated a clear policy framework linking trade, infrastructure, industrial strategy, and climate goals. “We don’t know who gets the Chinese quota,” Beatty said about which companies manufacturing cars in China will get a share of the new cap. “Is it Tesla? Volvo? New Chinese brands? Joint ventures? Each scenario has completely different economic consequences.” Kingston believes the Carney government will have no choice but to scrap the federal ZEV mandate altogether. “We already have strict emissions standards,” he said. “There’s no justification for two overlapping regulations—especially when one is now subsidizing foreign competitors.” Given that Chinese EVs could begin arriving as early as March, the federal government has now promised a broader automotive strategy to be announced within weeks. Whether that announcement addresses the looming ZEV mandate and charging station infrastructure gap remains unclear. “The Government of Canada continues to explore ways to support consumers, benefit Canadian workers and strengthen domestic supply chains,” said Transport Canada representative Sau Sau Liu after Transportation Minister Steven MacKinnon’s office declined to comment. Instead of a tariff-rate quota, which would mean unlimited car imports at a rising tariff, the Carney government has imposed a hard cap of 49,000 vehicles per year, equating to around three percent of total Canadian auto sales. Kingston points out that the number of EVs is equivalent to 30 percent of current annual EV sales in Canada, a portion of the market that industry experts don’t see growing much, even with the new Chinese entrants competing in the EV space. “That means you’re not going to see deep discounting,” Beatty said. “Importers will want to maximize their margins. The smaller the quota, the less likely you are to see cheap cars.” With the limited quota, Canadian consumers will likely have to temper their expectations of sudden EV affordability from this initial deal with China. In the case of the U.K., Beatty said, Chinese brands such as BYD sell their cars at major markups compared to domestic Chinese prices. However, certain Chinese EVs sold in the U.K. do still sell significantly cheaper than EV competitors for entry-level models. Dumping and overcapacity Both Kingston and Beatty point to China’s structural overcapacity as another underlying problem. Kingston estimates Chinese manufacturers now have two to three times more production capacity than their domestic market requires, supported by an estimated $230 billion USD in Chinese government subsidies, according to estimates from the Center for Strategic and International Studies (CSIS). “They’ve gone from exporting one million vehicles to six million [in 2025 within a four-year span],” Kingston said. “They’re selling below market price to gain market share and push out competition.” Lack of demand and infrastructure gap Even if Chinese EVs are competitively priced, experts believe Canada lacks the infrastructure to support a major expansion of EV adoption. Federal targets called for 100,000 public charging ports by 2025, but Canada currently has only around 38,000. Since the ZEV mandate was announced in December 2023, only about 12,000 new ports have been installed. “Canadians still say infrastructure is one of the biggest barriers to adoption,” Kingston said. Polling by the CVMA shows that while price is the top obstacle, concerns about range and charging availability are not far behind, especially for Canadians who drive long distances. Beatty adds that the other bottleneck is electricity itself. High-speed chargers along major corridors require enormous power capacity, often during peak demand. “Imagine a holiday weekend between Toronto and Montreal with a plurality of EVs,” he said. “There simply isn’t enough electricity being delivered to those roadside locations today.” Some Canadian firms are experimenting with battery-buffered charging stations (where batteries are switched and charged on off-peak hours) that store power and release it quickly, but Beatty says these solutions remain niche and capital-intensive. Despite years of incentives and mandates, EV demand has stalled, especially after most federal and provincial rebates ended last year. Kingston notes that ZEVs accounted for 11.3 percent of new vehicle sales in November 2025, well below Ottawa’s target of 23 percent by 2027. A record of over 264,000 ZEVs was sold in 2024 in Canada, but 2025’s available sales show a significant drop from the previous year. “We’ve moved past early adopters,” Kingston said. “Now we’re trying to convince mass-market consumers with one car and limited budgets. That’s a much harder sell.”