How Chinese EVs Have Impacted Global Markets—and What It Means for Canada as It Opens Its Market

Jan 29, 2026 - 11:00 Updated: Jan 29, 2026 - 10:56

How Chinese EVs Have Impacted Global Markets—and What It Means for Canada as It Opens Its Market

News Analysis

Canada is set to open its automotive market to Chinese electric vehicles as markets in Europe, Mexico, and South America are importing large volumes of Chinese EVs.

Earlier this month, Prime Minister Mark Carney struck a deal with China to allow 49,000 Chinese electric vehicles into Canada annually at a 6.1 percent tariff, replacing the 100 percent tariff imposed in 2024 amid concerns over Beijing’s non-market practices.

The deal comes at a time when EV sales by local manufacturers are declining in other countries, with large companies such Ford and Volkswagen announcing plans to scale back their EV operations. Meanwhile, companies like Tesla are falling behind China’s largest automaker BYD, although Tesla itself has major operations in China as well.

China’s auto market is a crowded one, leading Chinese auto manufacturers to increase exports to markets around the world, where they can offer their vehicles at lower costs than the domestic manufacturers in those countries.

China’s auto exports grew by 21 percent in 2025, driven by increased shipments of EVs, according to the China Association of Automobile Manufacturers. Deutsche Bank economists have estimated that China’s vehicle exports will rise by 13 percent in 2026. China’s key auto export destinations include Europe, South America, Russia, and Southeast Asia, among other areas.

An EV by Chinese company Nio is on display at the Essen Motor Show in Essen, Germany, on Dec. 3, 2025. Ina Fassbender/AFP via Getty Images

Europe

Chinese EVs have entered Europe’s auto market in large volumes over the last few years, and are expected to continue to make gains in the years ahead, despite measures imposed by the European Union (EU) such as tariffs and minimum import pricing.

A November 2024 report by researchers with the European Parliamentary Research Service warns that, “China’s rapidly rising exports of cheap EVs and growing overcapacity constitute a threat to Europe’s automotive industry.”

“China achieved its leadership position through subsidies and various competitive advantages such as its access to natural resources, its large internal market, cheap labour and cheap technologies,” the report said, adding that Chinese EVs are sold at approximately 20 percent below the price of European-manufactured EVs.

Chinese-made cars rose to 6 percent of sales in the EU in the first half of 2025, up from 5 percent in the same period of 2024, according to the European Automobile Manufacturers’ Association (ACEA) and S&P Global Mobility.

Meanwhile, EU-based manufacturers made up 74 percent of total EU car sales in the first half of 2025, the ACEA said, with Germany producing approximately 20 percent of cars sold in the EU, followed by Spain, Czechia, and France.

Chinese auto manufacturers are expected to double their European market share to approximately 10 percent by 2030, according to consulting firm AlixPartners.

While Ottawa intends to place a cap on the number of Chinese EVs it allows into the Canadian market and is continuing with a small tariff, Europe has imposed no such cap and only began to tariff Chinese-made EVs in 2024, at rates ranging from 7.8 percent to 35.3 percent.

“Fair competition is good,” European Commission president Ursula von der Leyen said in May 2024. “What we don’t like is when China floods our market with massively subsidized electric cars. And we have to tackle this, we have to protect our industry.”

However, the commission agreed this month to impose a minimum selling price for Chinese EVs in Europe instead of tariffs, something Beijing has previously pushed for as the EU’s anti-subsidy probe and tariffs on Chinese EVs had strained ties between China and the EU. The EU said minimum import prices must be set at a level “appropriate to remove the injurious effects of the subsidization,” and Chinese EV manufacturers’ plans for investments within the EU will also be considered.

The influx of Chinese EVs in the European market has led to a decline of non-Chinese EV sales in some countries, which are typically dominated by European and American car brands. For example, Tesla’s car registrations in the United Kingdom fell 9 percent year over year in December, according to industry data, amid intense competition from Chinese manufacturers that have expanded rapidly in Europe and other overseas markets.

The ACEA published data on Jan. 27 saying the sales of electric cars overtook those of gasoline-powered vehicles in the EU in December for the first time. Chinese EV maker BYD’s vehicle registrations increased by 229 percent in December, while U.S.-based Tesla fell by 20 percent.

Meanwhile, automakers such as Ford and Volkswagen have said they had plans to reduce their European workforces, due to competition from subsidized Chinese EVs and weaker domestic EV demand.

Brazil's President Luiz Inacio Lula da Silva (2nd-R) and China's Great Wall Motor (GWM) CEO Mu Feng (R) attend the inauguration of the GWM automobile factory in Iracemapolis, Sao Paulo state, Brazil on Aug. 15, 2025. Nelson Almeida/AFP via Getty Images

Argentina, Brazil

Chinese EV maker BYD is expanding in South America, with the launch of sales of its EVs in Argentina in October 2025. Argentina’s government has allowed up to 50,000 electric and hybrid vehicles without tariffs in 2026, instead of the usual 35 percent tariff. The government said it expects roughly 40,000 units to enter the country by the end of January.

BYD can currently import approximately 7,800 EVs under an allocation it was given by Argentina, according to Stephen Deng, manager for BYD in Argentina. Local car dealers have said the deal will likely benefit lower-cost Chinese carmarkers such as BYD.

Pablo Naya, CEO of Argentine EV company Sero Electric, says he believes the Argentine industry can “manage to compete” because at some point the government will impose more duties on the Chinese competitors. “China won’t be able to continue subsiding the products they send abroad,” he said on Jan. 21, according to the Associated Press.

Chinese-made cars are also expanding in Brazil as the Brazilian government welcomes foreign companies to do business in its country.

“Count on the Brazilian government. Whoever wants to leave, leave. Whoever wants to come, we welcome you with open arms,” Brazilian President Luiz Inacio Lula da Silva said at a local opening ceremony in August for a factory for Chinese auto company GWM. He noted that automakers such as Ford and Mercedes have scaled back their operations in Brazil, but he was pleased with the arrival of companies like GWM.

BYD also has a new factory in Brazil, and the manufacturer’s growth has faced pushback from local industry and labour groups who say that a large influx of Chinese EVs will hurt domestic auto production and jobs.

Aroaldo da Silva, president of IndustriALL Brasil, a confederation of unions across six industrial sectors, said that while countries around the world have started closing their doors to Chinese EVs, Brazil didn’t and “China made use of that.” Chinese imports now make up more than 80 percent of Brazil’s EV sales, according to ABVE, Brazil’s EV association.

Brazil eliminated tariffs on manufacturers like BYD in 2015 in an effort to spur EV adoption, but it reintroduced a 10 percent EV tariff in 2024 to encourage investment in the domestic auto industry. The tariff is expected to increase every six months until it reaches 35 percent in 2026.

Canada

Meanwhile, Canadian automotive representatives are voicing concern about an influx of Chinese EVs potentially undermining Canada’s auto sector.

Carney struck a deal with Beijing during his recent visit to China, agreeing to cut tariffs on Chinese EV imports from 100 percent down to 6.1 percent on the first 49,000 vehicles. This concession is in exchange for reduced Chinese tariffs on Canadian canola and various agricultural and seafood products, effective until the end of the year or possibly longer.

The Prime Minister’s Office (PMO) said 49,000 EVs represents less than 3 percent of Canada’s auto market. However, in the first three quarters of 2025, there were 128,961 EVs sold in Canada, according to Statistics Canada data. Based on these numbers annualized, there were approximately 170,000 EVs sold in Canada in 2025, which would make 49,000 EVs nearly 30 percent of Canada’s EV market.

The proportion of the market could be even greater if EVs are broken down by types. For example, 49,000 vehicles represents roughly half of all sales of battery-electric vehicles in Canada in 2025.

Carney said when announcing the new measure the preferential tariff rate would be expanded to up to approximately 70,000 Chinese EVs after five years. The prime minister said the deal will lead to Chinese investments in Canada but no specific agreement has been announced.

“It is expected that within three years, this agreement will drive considerable new Chinese joint-venture investment in Canada with trusted partners to protect and create new auto manufacturing careers for Canadian workers, and ensure a robust build-out of Canada’s EV supply chain,” the PMO said, adding that more than 50 percent of the Chinese EVs are expected to be “affordable” with an import price of less than $35,000.

Ontario Premier Doug Ford, whose province is the core of Canada’s auto industry, has called for a boycott of Chinese EVs, citing impacts on Canada’s auto sector and workers. The province is already dealing with car plant layoffs and production shift to the United States following the imposition of U.S. tariffs.

Canadian Vehicle Manufacturers’ Association president and CEO Brian Kingston said during a Jan. 21 press conference that Ottawa’s trade deal with Beijing is “deeply concerning” because it has the potential to “undermine Canada’s auto sector and presents risks to the future of our integrated North American automotive supply chain.”

He said the future of Canada’s auto sector depends on securing the country’s trade relationship with the United States, the destination for 90 percent of Canadian-made autos. “Diversification is not an option for automotive as markets in Europe and Asia are better served by assembly plants in those regions,” Kingston said.

A drone view shows EV for export and containers sitting at a port in Shanghai, China, on April 13, 2025. China Daily via Reuters

Automotive Parts Manufacturers’ Association president Flavio Volpe, who also spoke at the press conference, said letting 50,000 EVs into Canada would be the equivalent to wiping out a full auto plant shift, which would impact thousands of Canadian jobs directly and indirectly.

National Unifor President Lana Payne, who represents 40,000 auto sector workers in Ontario, said jobs have been put “on the chopping block.” She said the Canadian government had made a deal to give Beijing market access without “guarantees or any real commitments.”

The Global Automakers of Canada commented on the deal between Ottawa and Beijing in a Jan. 16 statement, saying it “risks creating significant market distortions, could ultimately limit consumer choice and undermine the viability of the companies currently investing in and supporting Canadian jobs.”

U.S. administration officials have also criticized Canada for opening its door to Chinese EVs. U.S. Treasury Secretary Scott Bessent said it would lead to “cheap goods” entering the United States as well. “We can’t let Canada become an opening [for] the Chinese to pour their cheap goods into the U.S.,” he told ABC News during a Jan. 25 interview.”

Former Prime Minister Justin Trudeau had slapped 100 percent tariffs on Chinese EVs in late 2024, following the lead of the Biden administration.

Industry Minister Mélanie Joly said on Jan. 26 that Ottawa will soon release its auto strategy to address the changing landscape. She also announced the launch of an “Auto Task Force” with Ontario to better coordinate work to support the industry.

“The idea of this Auto Task Force will be about looking at future strategic investments, making sure also that we protect our workforce, and frankly, their unionized workforce, and also making sure that trade works for workers and that they don’t feel that it’s going against them,” Joly said.

The minister did not have an update on the federal EV mandate at the time. Ottawa paused its EV sales mandate for the 2026 model year last fall and announced a 60-day review amid pressure from the industry to scrap it entirely.

Aaron Pan, Chris Summers, the Associated Press, and Reuters contributed to this report.