So, the latest buzz is about the deal between China and Canada which allows the 100% EV tariff to be dropped on some number of sales, starting at 49000 and increasing over the term of the agreement.
The skepticism is whether cheaper EVs will actually show up, or if already present companies like Tesla and Volvo will simply consume the quota and pocket the difference.
Honestly, I don't think that the deal was really about EVs but rather about reopening trade negotiations and tossing rural canola farmers a lifeline. However, I also think that the cheaper EVs will come.
The doubters think EVs aren't profitable enough in the first place, or as mentioned that greedy companies will simply hoover up the allocations.
As you can tell, I have a bit of a disagreement.
Problem #1 is China and export controls. With the number of units able to dodge the tariff being limited, I find it highly unlikely that China won't impose its own controls on top of these exports. Which is to say, if Chinese manufacturers want to take advantage of this opportunity, I don't think companies like Tesla and Volvo will be allowed to consume the whole allocation.
This still doesn't address the question of what impact this might have on the average selling price of an EV in Canada. Will the cars coming actually make EV ownership more affordable?
Well, funny that the doubters should mention Tesla. I think Tesla is actually a great model of how competitive the EV industry has become. Living in the US or Canada with our limited EV selection it can be easy to miss this, but Tesla actually actively adjusts prices, as it can, to make its cars more affordable (and competitive). AND, in Canada we have a current, and VERY poignant example of how importing from different regions CAN affect pricing. Currently, the lowest trim of the Model 3 is more expensive than the lowest trim of the Model Y which is traditionally a higher cost car.
The reason is because the Model 3 is made in the US and subject to tariffs, but we get our Model Ys from Germany I believe and there is no such issue. Now, the Model 3 is ALSO made in China. So, if Tesla is actively able to leverage this deal, it is not only possible, but highly likely that Model 3 prices in Canada will drop and drop significantly.
It likely won't drop to sub $35k prices. Which may leave people thinking "see, you won't actually see a car priced like that in Canada". And that... is harder to argue with. Admittedly. I don't know what models will come to Canada or what the final prices will be. More than likely however, many models will significantly undercut the Model 3 and there are a few good reasons for this.
To start, there are many EVs in China which are sold in China well under the price tag of a Model 3 in China. Those cars may not meet North American road standards, but they aren't so far away that it would bring up the cost substantially. The Chinese roads are not some apocalyptic unregulated hellscape, they are simply different. And many of the cars there are cheaper because they had the benefit of entering the game AFTER Tesla. They are next gen car companies. They don't have the same overhead and they are head quartered in a country where production is cheaper.
In the same way that classic manufacturers struggle to remain profitable competing with Tesla, Tesla is struggling to remain competitive with these newer EV companies.
Another thing to consider is that these companies don't have a presence in Canada or North America yet. If they want one, they will need to price themselves "attractively".
And they likely will because of this next point; EVs are getting cheaper to manufacture daily. Every delay in bringing a vehicle to market increases the cost wiggle room an auto maker has. Even Tesla doesn't adjust prices daily. You want SOME price stability to avoid pissing off people who already bought. So, the longer you hold out, the more safely you can bring down prices as long as things like battery material costs keep going down.
So, I don't think that the barriers are as big as people think that they are. I think that sub-$35k EVs in Canada are possible and we likely will see 1-3 such models. I expect a bigger influx in the $35k-45k which is still more affordable than typical EV offerings and then an even bigger slate of cars in the $45k-90k segment.
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