Ottawa will favour foreign automakers that build EVs in Canada under new policy
Canada will give preferential market access to automakers that build here and cut tariffs on Chinese-made EVs, Ottawa says. A new auto policy is due in February.
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By Torontoer Staff
The federal government plans to give foreign automakers that build vehicles in Canada preferential access to the domestic market under a new auto policy set for release in February, a senior official told reporters. The move is aimed at protecting and growing the country’s 125,000 auto-sector jobs as global automakers shift toward electric vehicles.
Ottawa also announced it will slash tariffs on Chinese-made electric vehicles, cutting levies from 100 per cent to 6.1 per cent for the first 50,000 imports. The government informed the United States about the decision before the public announcement, the official said.
How the policy will work
Details of the policy remain unpublished, but the official said access to Canada’s market will be more favourable for automakers that commit to domestic assembly. Companies that choose to import finished vehicles instead of building them in Canada would face less favourable terms. The government did not spell out mechanisms, but tariffs, quotas or other restrictions were cited as possible tools.
At the centre of the strategy is electric vehicle production in Canada. Ottawa hopes to attract Chinese, Korean and German firms to set up or expand assembly lines here, drawing on a playbook from the 1980s when Japanese automakers established plants in Ontario. Today about 70 per cent of vehicle assembly in Canada is Japanese-owned.
Tariff deal with China and notifying the U.S.
Prime Minister Mark Carney announced the tariff cut during a trade visit to China. The government expects the deal to encourage investment in Canada’s auto sector, including by Chinese firms, over the next three years.
Canada expects the deal with China will lead within three years to Chinese investment in this country’s auto sector.
Mark Carney
The senior official said Ottawa provided advance notice to Washington of the tariff change through Canada’s ambassador to the United States, informing U.S. Trade Representative Jamieson Greer. In the short term Canada expects many of the Chinese-made EVs arriving under the lower-tariff arrangement will be manufactured in foreign-owned factories in China, including Tesla. Over time, the share of homegrown Chinese brands is expected to grow.
Conditions for approving investments
Officials said Ottawa will attach conditions to approvals for foreign auto assembly projects. The aim is to ensure tangible benefits for Canadian workers and suppliers while addressing national security and privacy concerns connected to connected vehicles.
- Minimum investment thresholds and commitments on plant size
- Consideration of a unionized workforce or commitments to local labour standards
- Canadian control or clear sharing arrangements for intellectual property
- Requirements for domestic content and integration of Canadian technology
- Security reviews and mitigations for concerns such as potential spyware in connected vehicles
Why Ottawa thinks Canada can compete
Ottawa argues Canada has the building blocks for expanded EV assembly. The country is home to major parts suppliers, including Magna, Linamar and Martinrea, and a domestic market that purchases about 1.8 million vehicles a year. While access to the U.S. market can no longer be taken for granted, officials said automakers could aim to assemble vehicles in Canada for other overseas markets, including the Middle East.
Officials acknowledged that if automakers refuse to build in Canada, their access to the domestic market will be downgraded. The policy is intended to create leverage to convert imports into Canadian-built production, preserving jobs and linkages across the supply chain.
What comes next
The auto policy document is expected in February. Ottawa will need to balance incentives and conditions to attract investment while managing relations with trading partners and addressing security concerns tied to connected vehicles. The government's early diplomatic step of notifying Washington suggests officials want to limit surprises, but the policy will be scrutinized by industry and allied capitals alike.
Whether the approach succeeds will depend on how clearly Ottawa defines the rules for market access, the scale of incentives on offer, and how quickly automakers commit to Canadian assembly. The government says its objective is straightforward: secure and grow jobs in a rapidly changing global auto industry.
autoselectric vehiclestradeChinaMark Carney
