Industry experts say Canada’s trade deal with China, which cuts the tariff on Chinese electric vehicles from 100 per cent to 6.1 per cent for up to 49,000 vehicles a year, could lead Chinese automakers to invest in Canada — but large assembly plants likely depend on access to the United States market.
A deal that reopened the door
The agreement, reached during Prime Minister Mark Carney’s visit to Beijing, lowers the tariff on an initial quota of 49,000 Chinese EVs a year, rising to 70,000 within five years, while China reduces tariffs on a range of Canadian goods. Speaking in Doha, Qatar, on the weekend, Carney said the government has already spoken with Chinese companies interested in producing affordable electric vehicles in Canada.
“We’ve had direct conversations directly from the Chinese companies … with explicit interest and intention to partner with Canadian companies,” Carney said.
Ottawa says it expects the deal to “drive considerable new Chinese joint-venture investment in Canada” within three years, creating auto manufacturing jobs for Canadian workers.
Test the market first, analysts say
Automotive consultant Sam Fiorani, vice-president of global vehicle forecasting at AutoForecast Solutions, said Chinese manufacturers are already moving toward local production in the markets where they sell, as they adapt to trade restrictions around the world.
“Once they get a foothold in Canada, the idea that they could build plants locally, the odds of that jump dramatically,” Fiorani said in an interview. “Build locally is the long-term plan for any Chinese automaker.”
An S&P Global Mobility report from last November noted that Chinese producers have built at least 15 facilities across Southeast and Central Asia since 2022, including in Malaysia, whose vehicle market is less than half the size of Canada’s. BYD is building plants in Hungary and Turkey, Chery has a joint venture in Spain, and Stellantis has partnered with Leapmotor to build its vehicles in Poland.
“In most cases, consumers are more open to automakers who invest locally, regardless of where a brand’s home market is,” S&P analyst Abby Chun Tu said in the report.
The American question
The catch, analysts say, is scale. Canada’s market alone is small, and the North American auto industry was built on the assumption that a plant in Canada also serves the United States.
“The Canadian market itself is just too small to justify an assembly plant – which is why the auto industry established an efficient North American assembly system – a system that the current U.S. administration seems determined to destroy,” said Andrew King, managing partner of DesRosiers Automotive Consultants Inc.
Ryan Robinson, automotive research lead at Deloitte Canada, said Chinese firms could opt for less costly modular production — assembling pre-built components in Canada — if U.S. access proves unlikely. TD chief economist Beata Caranci has also said full Chinese EV production in Canada is unlikely given market-access concerns, though partnerships could still strengthen Canada’s EV ecosystem.
The debate lands as the future of Stellantis’s Brampton plant remains unresolved after the automaker moved production planned for it to the United States last year. Ontario Premier Doug Ford called the China deal terrible for the auto sector, and Unifor national president Lana Payne called it a self-inflicted wound to an already injured industry.
What happened after
The quota system took effect on March 1, 2026, at the 6.1 per cent most-favoured-nation rate. Chinese brands did move in to sell: BYD began building a Canadian dealership network, and in October 2026 Geely confirmed it would enter Canada in 2027 with its own retail and service network. But consistent with the analysts’ warnings, the investment so far is in sales and distribution — no Chinese automaker has announced a Canadian assembly plant.
