If the federal government is expecting Chinese electric vehicle manufacturers will rush to build an assembly plant in Canada, economists, industry analysts and insiders say they’re sorely mistaken.
The biggest reasons, say experts? There’s no guarantee Chinese EV makers would be able to sell anything they produced here in the U.S., it would cost billions to build or buy a plant, and they’ve already got more than enough capacity at home.
“The prospects of a Chinese manufacturer coming here … are so remote I can’t take the government’s hope seriously,” said Jim Stanford, an economist with the Centre for Future Work. “I think they’re dangling this idea as a reaction to the anger from the auto sector.”
Friday, the federal government announced a deal had been reached to slash Canadian tariffs on 49,000 Chinese EVs from 100 per cent to 6.1 per cent in exchange for China cutting its tariff on Canadian canola seed from 100 per cent to 15 per cent, as well as slashing tariffs on Canadian lobster, crab and peas.
The deal, according to Prime Minister Mark Carney, comes with an expectation that Chinese manufacturers will put “considerable” investment into Canada’s automotive sector within three years. (The number of EVs imported here could also rise to 70,000, Carney said).
The federal government has also said it’s planning to release a new auto industry policy this year, which is expected to include a commitment to the idea that companies which sells cars in Canada must also build some here.
With a review of the Canada-U.S.-Mexico agreement on trade still taking place this year, as well as with U.S. tariffs targeting automotive imports, there’s already plenty of uncertainty, Stanford said.
Add in U.S. security concerns over Chinese technology, and it’s even less likely vehicles made in Canada by a Chinese company would be allowed into the world’s biggest economy, he added.
“I really don’t see a serious business case for a Chinese manufacturer to have an assembly plant in Canada,” said Stanford.
Industry analyst Ryan Robinson agreed that it’s not exactly a sure bet.
“It really all depends on the outcome of CUSMA negotiations,” said Robinson, the head of automotive research at Deloitte.
The Canadian market simply isn’t big enough to justify an assembly plant based solely on domestic demand, said Robinson.
“Most of our production here is set up for export,” he added.
If Chinese manufacturers are looking to have a plant in Canada, they could look at buying an existing one, Robinson suggested.
Last year, GM ended production at its CAMI plant in Ingersoll, Ont., which had been producing the Brightdrop electric delivery van.
Carney has also publicly mentioned the Stellantis assembly plant in Brampton, which has been idle since late 2023 in order to retool to make EVs.
Stellantis announced last February that it was pausing the retooling, then said in October said it was moving production of the new version of their popular Jeep Compass from Brampton to Illinois.
While cheaper than building from scratch, buying an existing assembly plant would still mean a Chinese manufacturer would want access to the U.S. market — or at least the prospect of it — said Robinson.
“You don’t put a plant in for domestic consumption of even 70,000 vehicles,” Robinson said.
A more economically viable option, said Robinson, would be a so-called “knock-down plant,” where assembly kits would be shipped from China then put together here.
“At 50,000, you could think about a knock-down plant, but what that means is far less opportunity for local suppliers to participate,” Robinson said.
Robert Karwel, an automotive industry analyst and researcher at J.D. Power, says another factor making Chinese assembly plants in Canada unlikely is that they just don’t need any.
“They have a massive overcapacity. You only build that for one reason — to use it to build export markets,” said Karwel, who estimates Chinese consumers buy 25 million vehicles a year, half of them electric. Their manufacturing capacity? More than double that, at 60 million, Karwel added.
“Are they likely to want to spend money here to build a plant? No,” said Karwel bluntly.
The head of the association representing the Detroit automakers agreed that Chinese manufacturers really don’t need any more EV capacity, whether in Canada or elsewhere.
“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,” said Brian Kingston, CEO of the Canadian Vehicle Manufacturers Association.
Still, argued David Adams, head of the association representing non-Detroit automakers in Canada, economic viability isn’t necessarily a Chinese company’s foremost concern — at least not immediately.
“It’s all about getting the footprint,” said Adams, CEO of Global Automakers of Canada. “It’s not all about making money out of the gate.”
