Tesla asked Canada to reduce tariffs on its EVs made in China, Reuters source says

Before Canada said this week it was imposing a 100 per cent duty on Chinese-made electric vehicles, Tesla approached Ottawa and asked for a lower tariff on its autos, a Canadian government source told Reuters on Wednesday.

Canada, following the lead of the United States, said on Monday it was setting the tariff for all Chinese-made vehicles sold in the country because of what it called China's intentional state-directed policy of overcapacity.

The duties — effective Oct. 1 — apply to all EVs shipped from China, including those made by Tesla. In June, Ottawa had flagged its intention to impose duties.

The source, who requested anonymity given the sensitivity of the situation, said Tesla approached Canada before the official announcement. The automaker asked for a rate similar to what it received in the European Union, the source said.

Tesla does not disclose its Chinese exports to Canada. However, vehicle-identification codes showed that the Model 3 compact sedan and Model Y crossover models were being exported from Shanghai to Canada.

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The EU softened its stance on Tesla this month when it imposed a nine per cent tariff on cars the company made in China, compared to a 36.3 per cent rate it slapped on other Chinese EV imports.

While the EU only considered direct subsidy costs when calculating its tariff for Tesla, the United States and Canada looked at subsidies, industrial over-capacity, non-market policies as well as environmental and labour standards, the source said.

Tesla has not contacted Ottawa since Monday, the source said.

Tesla was not immediately available for comment to Reuters.

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The office of Finance Minister Chrystia Freeland, who has overall responsibility for tariffs, declined comment to Reuters on talks with Tesla.

Canadian imports of automobiles from China to its largest port, Vancouver, jumped 460 per cent year over year to 44,356 in 2023, when Tesla started shipping Shanghai-made EVs to Canada.

U.S. President Joe Biden in May announced a quadrupling of tariffs on Chinese electric vehicles to 100 per cent, a doubling of duties on semiconductors and solar cells to 50 per cent, as well as new 25 per cent tariffs on lithium-ion batteries and other strategic goods. Tesla has never shipped China-made models to the U.S. market, according to a company letter in July 2023 to the U.S. Environmental Protection Agency.

Implementation of the U.S. tariffs has been delayed until September and there is a possibility planned duties might be softened this week.

Volvo said it was looking into the effects that the increased tariffs in Canada would have. The Swedish carmaker said it imported EX30, XC60 and a limited number of S90s models from China to Canada, but did not disclose specific numbers.

Swedish EV maker Polestar, partly owned by Volvo and China's Geely, ships the Polestar 2 from China to Canada. The company said it was reviewing the Canadian tariff's impact.