Tesla Plea for Lower Tariff from Canada on Chinese EV

According to a Canadian government source, before Canada announced its decision this week to impose a 100% duty on Chinese-made electric vehicles (EVs), Tesla had approached Ottawa with a request for a reduced tariff on its vehicles.

The source, who asked for anonymity due to the situation’s sensitivity, revealed that Tesla sought a tariff rate similar to what it received in the European Union.

Canada Follows U.S. Lead in Tariff Imposition:

On Monday, Canada announced it would impose a 100% tariff on all Chinese-made vehicles sold in the country. This decision mirrors the United States and stems from what Canada described as China’s deliberate, state-directed policy of overcapacity.

The duties, which will take effect on October 1st, will apply to all EVs shipped from China, including those made by Tesla. Ottawa had previously indicated in June its intention to impose such duties.

Tesla’s Chinese Exports to Canada:

While Tesla does not disclose its Chinese exports to Canada, vehicle-identification codes have shown that the Model 3 compact sedan and Model Y crossover models have been exported from Shanghai to Canada.

The European Union softened its stance on Tesla earlier this month, imposing a 9% tariff on cars the company made in China, in contrast to the 36.3% rate applied to other Chinese EV imports.

Differing Approaches to Tariff Calculations:

The source noted that while the EU considered only direct subsidy costs when calculating Tesla’s tariff, the United States and Canada took a broader view.

Their calculations included factors such as subsidies, industrial overcapacity, non-market policies, and environmental and labor standards. The source also mentioned that Tesla has not contacted Ottawa since the announcement on Monday.

Canada’s Response and Industry Reactions:

Tesla has yet to respond to requests for comment. The office of Canada’s Finance Minister, Chrystia Freeland, who oversees tariff policies, declined to discuss any conversations with Tesla.

Meanwhile, Canadian imports of automobiles from China to Vancouver, the country’s largest port, surged by 460% year-over-year to 44,356 units in 2023, following Tesla’s initiation of shipments of Shanghai-made EVs to Canada.

Broader Context and Potential U.S. Tariff Adjustments:

In May, U.S. President Joe Biden announced a significant increase in tariffs on Chinese electric vehicles, raising them to 100%. The U.S. also doubled duties on semiconductors and solar cells to 50% and introduced new 25% tariffs on lithium-ion batteries and other strategic goods.

Notably, Tesla has never shipped China-made models to the U.S. market, as confirmed by a company letter sent to the U.S. Environmental Protection Agency in July 2023. Implementing these U.S. tariffs has been delayed until September, with a possibility that the planned duties might be softened this week.

Volvo and Polestar Consider the Impact of Canadian Tariffs:

Swedish automaker Volvo Cars has indicated that it is assessing the impact of Canada’s increased tariffs. The company imports models such as the EX30, XC60, and a limited number of S90s from China to Canada, though specific figures were not disclosed.

Similarly, Swedish EV maker Polestar, partially owned by Volvo Cars and China’s Geely, ships the Polestar 2 from China to Canada and reviews the tariff’s implications.