Along with imposing a significant tariff on electric vehicles (EVs) made in China, the Canadian government will also be eliminating the $5,000 federal rebate on EVs imported from China. Both moves could have a significant impact on Tesla, but it remains to be seen how the US-based automaker will react to the new measures.
On Monday Prime Minister Justin Trudeau announced that starting October 1, 2024, the Canadian government would impose a 100% tariff on electric vehicles (EVs) made in China. As it stands, Tesla is the only automaker that will be impacted as they are currently importing the Model Y and Model 3 Performance from China into Canada.
However, there was another key piece of the announcement that somewhat flew under the radar, and that was the government is also eliminating the C$5,000 federal rebate on EVs made in China.
The rebate, previously available to consumers purchasing EVs with no restrictions on the country of original, will now only apply to vehicles manufactured in countries with which Canada has free trade agreements. This change means that only EVs from countries such as Japan, Korea, and those in Europe will continue to be eligible for the incentive.
As we mentioned, only Tesla will be impacted by the new measures that will go into effect on October 1, 2024. Tesla has been importing cars from China this since last year after the US imposed restrictions for their US$7,500 tax credit, requiring that a percentage of materials in EV batteries come from the US or countries with which the US has a free trade agreement.
Since Canada had no such restrictions at the time, Tesla decided to reserve production from Fremont and Giga Texas for the US market, and supply Canada with vehicles from Giga Shanghai.
With the new tariff and the elimination of the rebate on Chinese-made EVs, Tesla is likely to react to the changes by changing their logistics and again supply Canada with Fremont-made cars. This will ensure that Canadians will not be hit with higher prices and still be able to receive the C$5,000 rebate.
However, the company only has a little over a month to do this, a timeframe that might be too small to entirely avoid the impact of the new rules. If it is, we might see a delay in deliveries in Canada as Tesla works to alter their supply chain.
