Tesla (TSLA) and brands owned by the Geely Group (GELYF) are expected to be the primary winners after Canada decided to lower import taxes on electric vehicles made in China. This new trade deal allows 49,000 vehicles to enter the country each year with a much lower tax rate of 6.1 percent, completely removing the previous 100 percent penalty. In exchange for this change, China has agreed to lower its own trade barriers on Canadian canola.
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Tesla and Geely Gain Immediate Access
Because they already have vehicles that meet North American safety standards, Tesla, Volvo (VLVLY), and Polestar (PSNY) are in the best position to use this new quota. Before the high taxes were put in place in 2024, Tesla was a massive player in this space. The company shipped over 44,000 cars from China to Canada in 2023 alone. Now that the 100 percent tax is gone, these companies can start bringing in lower-cost models from their Chinese factories almost immediately.
To help more brands enter the market quickly, the Canadian government has promised to speed up its paperwork. Transport Canada will now certify new electric models from China in just eight weeks. This change is designed to help other big names like BYD (BYDDF) join the market. BYD is currently the largest EV maker in the world, but it has very few sales in Canada right now. The new rules could give their budget-friendly cars a huge advantage.
Luxury Brands See Major Price Cuts
The high-end market is also seeing a big shift. Lotus, a sports car brand owned by Geely, expects its prices to drop significantly. Their Eletre SUV, which usually costs over $300,000 in Canada, could see its price fall by about 50 percent thanks to the lower tax rate. This makes luxury electric cars much more competitive against local and European rivals.
The deal includes specific rules to make sure regular drivers benefit too. By the year 2030, half of all the cars allowed under this special quota must have a price tag of $35,000 or less. This is a major change because most electric vehicles currently for sale in Canada are much more expensive. The government hopes this will force all car companies to lower their prices to stay competitive.
Key Takeaway
To put it simply, Canada is trying to balance two very different needs. On one hand, they want to help their farmers sell canola to China. On the other hand, they want more people to be able to afford an electric car. These tax cuts make it much easier for companies like Tesla and Volvo to sell cars, but the policy also allows for more low-cost competition to enter the country. This plan represents a gamble that could make electric vehicles more common on Canadian roads, even if it creates more pressure for local factories.
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