It’s “great news” that Chinese electric vehicle giant BYD is planning to set up shop in Canada, and Ottawa should not block that move by imposing tariffs on Chinese EVs, Corporate Knights CEO Toby Heaps and Director of Research Ralph Torrie conclude this week in a Globe and Mail op ed.
Affordable electric cars from Chinese companies like BYD “could open up the Canadian EV market to millions of middle class families,” Heaps and Torrie write. “The electricity needed to charge those cars will generate cash flow for Canadian utilities, helping them prepare for the growing role of electricity in our energy system.” And with the vast majority of the cars manufactured in Canada destined for export, concerns about domestic job loss are exaggerated.
But it’s a “fraught time” for the discussion, they add, with the United States introducing punitive tariffs on Chinese EV imports in mid-May and Ottawa considering the same. A federal consultation on Canada’s next move closed yesterday.
Although Canada’s EV supply chain potential is “ranked first in the world,” Finance Canada said in announcing the consultation, the domestic auto sector faces “unfair competition from China’s intentional, state-directed policy of overcapacity and lack of rigorous labour and environmental standards. Chinese producers are generating a global oversupply that will erode the profit incentives of EV producers around the world, including in Canada.”
But Heaps and Torrie say blocking Chinese imports would be a mistake. “Chinese EVs should be accepted for sale in Canada without the tariffs, as long as they meet Canadian standards and are made by companies that do not employ forced labour in their supply chains,” they write. “Canadian households want and need affordable electric vehicles, sooner rather than later. And reasonably affordable Chinese electric sedans and mid-sized crossovers are available for export to Canada now.”
The debate turns on whether China would flood the Canadian market without a high tariff and put many of the country’s 125,000 auto workers out of work. The op ed points to the disconnect that already exists between auto purchases and sales in Canada: Most of the 1.5 million new cars that Canadians already buy each year are made in foreign countries, some of them in China. Nearly 90% of the cars assembled by Canadian auto workers are exported, “and that’s still going to be the case for EVs.”
While it’s realistic to expect some job impact as more affordable Chinese EVs enter the market, the losses would be in the range of 2%. But the shift would create jobs, as well. “If Chinese EVs grew to 20% of new car sales over the next five years, by 2030 it would save the families that bought the vehicles C$9 billion in fuel and maintenance costs. The money would recirculate in local economies, generate more than $1.5 billion in revenue for Canadian utilities, and eliminate 12 million tonnes of greenhouse gas emissions. Even under a wide range of assumptions, the net effect would be more wealth circulating in the Canadian economy.”
Moreover, it isn’t likely that Chinese manufacturers would “flood the market”, since their export strategy to date has emphasized sales margin over volume. Although Chinese EVs are available for as little as US$12,000 on the domestic market, the same vehicles would sell for $35,000 or $45,000 in Canada—still a relatively affordable option for families looking for a new car. “Otherwise, they will have to turn to a combustion vehicle that would lock in poorer performance, higher fuel and maintenance costs, air pollution, and greenhouse gas emissions that would persist well into the 2030s.”
Charges that Chinese vehicles are made with forced labour “must be taken seriously,” Heaps and Torrie stress. “It is already illegal to import products tainted with forced labour,” although Canada has never applied that standard against any product. But “this law should be enforced at the individual company level, rather than by a tariff that would shut out any Chinese-made EV, including those made in China by Western carmakers like Tesla, Honda, and General Motors.”
Read the rest of the op ed here.
