Why Chinese EVs were never going to get Canada to its electric vehicle targets

A few short weeks ago, Canada agreed to partially roll back the 100 percent tariff it imposed on Chinese electric vehicles (EVs) in 2024, allowing up to 49,000 to enter the Canadian market at the previous 6.1 percent tariff rate. In exchange, China removed its tariffs on canola meal, peas, and certain seafood products and lowered the tariff on canola seed to 15 percent. This move was met with mixed reactions across Canada. While some were concerned about the implications for Canada’s auto industry, agriculture producers, especially those on the prairies, were pleased to see access to the Chinese market reopened; canola products are one of Canada’s most economically significant exports. While it is a return to the pre-2024 status quo, the deal was both economically and politically notable given the importance of diversifying Canada’s non-U.S. exports. It also sparked speculation that the federal government may see the move to reopen the Canadian market to Chinese EVs as a way to help meet its zero-emissions vehicle (ZEV) mandate. But on February 5th, Prime Minister Mark Carney announced that the ZEV mandate is off the table, opting instead for EV rebates and stricter greenhouse gas emissions standards. The mandate, which had been briefly paused, required that all new passenger vehicles sold in Canada be zero-emission by 2035, with interim targets along the way. With current EV sales accounting for just 9 percent of new car sales as of the latest data, Canada was nowhere close to reaching the first milestone of 20 percent by this year. Even so, the government maintains its goal of significantly increasing EV adoption. The recent announcement set a new target of 90 percent EV adoption by 2040. Regardless of this recent development, the impact of the trade deal with China on EV adoption is still likely to be small. Lower tariffs, now combined with the new consumer incentives announced by the prime minister, will certainly increase purchasing. Additionally, the structure of the import quota may also be helpful to incentivize consumers: by 2030, 50 percent of the quota will be reserved for lower-cost EVs priced at or under $35,000. But while that quota was expected to rise over time, reaching 70,000 vehicles within five years, higher limits do not guarantee more purchases. Recent trends suggest weaker, not stronger, demand for EVs. Over the last year, for instance, EV sales collapsed by 40 percent, driven by the pause or cancellation of federal and provincial incentive programs, economic uncertainty, range anxiety, and consumer backlash against Tesla. While the federal government has announced the return of EV purchase incentives and additional funding for charging infrastructure, these measures will take time to translate into higher adoption. In the meantime, constraints beyond price continue to limit uptake, including electricity generation capacity and the availability of charging infrastructure. Even under generous assumptions—where the full quota is used in 2030 and represents net new purchases, not just folks switching from competitor EVs to Chinese ones—it’s still 20 percentage points below what the target in the mandate was for that year. Reaching that goal would require a 48 percent compound annual growth rate year-over-year, a far cry from 2020-2024, where it was 2.5 percent. One thing is clear: Canada wasn’t on track to meet its ZEV target, and the recent tariff decrease doesn’t meaningfully change that trajectory. The deal amounts to a return to the status quo, which may slightly increase purchasing but doesn’t resolve the constraints holding back adoption by itself. A version of this post was originally published by the Business Council of Alberta.