Key Takeaways:
- Canada plans to reserve preferential access to its domestic auto market for foreign automakers who build vehicles in the country.
- The new auto policy, to be released in February, aims to preserve and grow Canada’s 125,000-job auto sector.
- Foreign companies that make cars in Canada will have more favorable access to the Canadian market than those that choose to import cars assembled outside the country.
- Canada has reached a tariff deal with China on electric vehicles, slashing tariffs from 100% to 6.1% for the first 50,000 vehicles imported.
- The government expects Chinese investment in Canada’s auto sector to follow the January 16 deal, with a focus on electric vehicle production.
Introduction to Canada’s New Auto Policy
Canada is set to unveil a new auto policy in February, which will prioritize foreign automakers that build vehicles in the country. According to a senior Canadian official, the policy aims to preserve and grow Canada’s 125,000-job auto sector, which is facing challenges due to the protectionist policies of US President Donald Trump. The official stated that foreign companies that make cars in Canada will have more favorable access to the Canadian market than those that choose to import cars assembled outside the country. This move is seen as a way to encourage foreign automakers to invest in Canada’s auto sector and create jobs.
Tariff Deal with China
The first step in Canada’s new approach to auto policy was the tariff deal struck with China on January 16. The deal slashes Canadian tariffs on Chinese-made electric vehicles from 100% to 6.1% for the first 50,000 vehicles imported. The senior official said that the Canadian government gave advance notice to the US of this tariff cut, which was announced during Prime Minister Mark Carney’s visit to Beijing. The deal is expected to lead to Chinese investment in Canada’s auto sector, with a focus on electric vehicle production. The official noted that in the short term, most of the Chinese-made EVs coming into Canada will be from Western-owned factories in China, including Tesla, but over time, homegrown Chinese automakers are expected to comprise a bigger share.
Encouraging Foreign Investment
At the core of Canada’s new auto strategy is electric vehicle production in Canada. The government wants to entice Chinese, Korean, or German vehicle-makers to commence and grow auto sector production in Canada. This plan is inspired by Ottawa’s success in the 1980s at attracting Japanese auto factories to Canada from companies such as Honda and Toyota. Today, 70% of auto assembly in Canada is Japanese. The official acknowledged that a potential shuttering of access to the US auto market means that any vehicle assembly in Canada can’t rely on shipping cars south of the Canada-US border. However, with 1.8 million vehicles purchased each year in Canada, the market isn’t negligible, and the official expects foreign auto makers would envision assembling vehicles in Canada for other overseas markets as well, including possibly the Middle East.
Conditions for Foreign Investment
The official said that concerns about possible spyware in Chinese-made EVs could be mitigated by conditions Ottawa would place before greenlighting their production in Canada. The government intends to enforce beneficial conditions before approving foreign auto assembly investments in Canada, including commitments on the size of investment, possibly the use of a unionized workforce, whether Canadians would control the intellectual property, and how much domestic technology would be incorporated into plants. Canada has the ingredients for a flourishing domestic auto assembly industry, including sizeable auto parts makers such as Magna, Linamar, and Martinrea. The official noted that the government is committed to creating a favorable business environment for foreign investors while ensuring that Canadian interests are protected.
Conclusion
In conclusion, Canada’s new auto policy aims to preserve and grow the country’s auto sector by encouraging foreign automakers to invest in Canada. The tariff deal with China is a significant step in this direction, and the government expects Chinese investment in Canada’s auto sector to follow. With a focus on electric vehicle production, Canada is positioning itself as an attractive destination for foreign investors. The government’s commitment to enforcing beneficial conditions for foreign investment will ensure that Canadian interests are protected while creating a favorable business environment for foreign investors. As the auto industry continues to evolve, Canada is taking proactive steps to remain a significant player in the global market.
