Experts say a Chinese EV assembly plant in Canada is unlikely
Economists and industry analysts call federal hopes for Chinese EV plants in Canada remote, citing U.S. market access, high costs and Chinese overcapacity.
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By Torontoer Staff
Ottawa’s expectation that Chinese electric vehicle makers will set up assembly operations in Canada within a few years faces deep scepticism from economists and industry analysts. Experts point to limited access to the U.S. market, the billions required to build or buy plants, and excess manufacturing capacity in China as the primary obstacles.
The federal government reached a trade deal that cuts Canadian tariffs on 49,000 Chinese EVs from 100 per cent to 6.1 per cent. In return, China reduced tariffs on Canadian canola seed and lowered duties on lobster, crab and peas. Prime Minister Mark Carney said the deal comes with an expectation of considerable Chinese automotive investment in Canada within three years.
Market access and trade uncertainty
Analysts say a decisive barrier is access to the U.S. market. With U.S. tariffs on some automotive imports and heightened security scrutiny of Chinese technology, vehicles assembled in Canada by a Chinese firm might face restrictions entering the world’s largest auto market. That prospect weakens the business case for a plant here.
The prospects of a Chinese manufacturer coming here, are so remote I can’t take the government’s hope seriously. I think they’re dangling this idea as a reaction to the anger from the auto sector.
Jim Stanford, economist, Centre for Future Work
Deloitte automotive researcher Ryan Robinson noted the outcome of the Canada-U.S.-Mexico Agreement review will matter. Canada’s domestic market is too small to justify a full-scale assembly plant on sales alone, he said, so any investment would need a credible route to the U.S. or other export markets.
Costs, capacity and plant options
Building a greenfield assembly plant costs billions. Buying and retooling an existing plant is cheaper but still expensive, and would only make sense if manufacturers expected to export from Canada. Analysts point to two idle or paused facilities that have been discussed publicly as potential candidates for acquisition or use.
- GM’s CAMI plant in Ingersoll, Ontario, which ended production of the Brightdrop electric delivery van
- Stellantis’s Brampton plant, which paused retooling and saw planned production moved to the United States
Robinson said an alternative is a knock-down assembly operation. In that model, kits arrive from China and are assembled locally. At volumes of roughly 50,000 vehicles, a knock-down facility can be viable, but it creates fewer opportunities for Canadian parts suppliers.
You don’t put a plant in for domestic consumption of even 70,000 vehicles.
Ryan Robinson, head of automotive research, Deloitte
China’s overcapacity and global strategy
Industry researchers point out that Chinese manufacturers already have very large production capacity at home. Robert Karwel of J.D. Power estimates Chinese automakers can produce around 60 million vehicles annually, while domestic demand is approximately 25 million. That imbalance reduces the incentive to invest in foreign assembly plants.
Are they likely to want to spend money here to build a plant? No.
Robert Karwel, automotive industry analyst, J.D. Power
Brian Kingston, CEO of the Canadian Vehicle Manufacturers Association, said China is already using excess capacity to export vehicles. From his perspective, Chinese producers do not need additional manufacturing centres abroad.
The last thing China needs is more EV manufacturing capacity. What they’re doing right now is taking that excess capacity and dumping vehicles in different markets.
Brian Kingston, CEO, Canadian Vehicle Manufacturers Association
Policy levers and industry reactions
Ottawa has said a forthcoming auto policy will include a requirement that companies selling cars in Canada also build some here. That approach aims to protect local suppliers and jobs, but it could further deter Chinese firms if sell-in-Canada rules are not matched by secure access to the U.S. market.
David Adams, CEO of Global Automakers of Canada, suggested Chinese firms might accept short-term losses to establish a footprint. Still, most experts expect any initial moves to focus on assembly kits or acquisitions rather than large new plants.
It’s all about getting the footprint. It’s not all about making money out of the gate.
David Adams, CEO, Global Automakers of Canada
For Canadian suppliers and workers, the form that Chinese involvement would take matters. Full assembly operations generate more local supply-chain participation than knock-down assembly, which shifts much of the value back to the exporter.
What to expect next
Negotiations under CUSMA and U.S. policy choices will be decisive. In the near term, analysts expect limited Chinese investment in large-scale Canadian assembly. More likely outcomes include knock-down assembly, targeted acquisitions of existing facilities, or increased vehicle imports if tariff reductions are sustained.
Ultimately, experts say Ottawa should temper public expectations. The trade deal makes imports cheaper, but it does not remove the key economic and political barriers to large Chinese assembly investments in Canada. For now, a major new Chinese plant remains unlikely.
chinaelectric vehiclestradeauto industrytariffs
