Tag: ev

Keeping Chinese EVs out of Canada will have quantifiable costs that haven’t been widely acknowledged, the data shows.

This article was written by Marco Chown Oved and was published in the Toronto Star on Oct 30, 2024.

If you live in Canada and want to buy an electric vehicle, you’re going to shell out far more than you would if you lived elsewhere.

In China, you can purchase the compact BYD Seagull for 90,000 yuan — or about $17,000 Cdn.

In Switzerland, the similarly sized Dongfeng Nammi Box runs about $27,000 Cdn.

But here, the cheapest EV is the Fiat 500e, a small three-door hatchback, which comes in around $40,000.

That’s a 48 per cent surcharge, essentially for living in Canada. Or, more precisely, because Canada is keeping cheap, Chinese-built EVs out.

There had been some hope that cheaper EVs were coming to Canada, but that was extinguished this summer, when the federal government announced 100 per cent tariffs on Chinese EVs, essentially guaranteeing they will not be available anytime soon.

Support for this decision has been widespread — from industry, unions and partisans across the political spectrum, who say it will protect Canada’s nascent domestic EV supply chain, which has been promised more than $50 billion in public subsidies, and all the jobs and economic ripple effects the auto industry provides. The tariffs are also being justified as a barrier to keep Chinese spyware out of North American cars.

But while few would advocate for dropping the tariffs entirely and allowing Chinese EVs to flood the market, keeping them out has quantifiable costs that haven’t been widely acknowledged.

Environmentalists and green economists say the tariffs come at a steep cost to the Canadian consumer, who will shell out tens of thousands of dollars more for an EV, and to the climate, which will be forced to absorb additional carbon, due to the slower uptake of more expensive EVs.

Ralph Torrie, director of research at Corporate Knights, has crunched the numbers in a bid to show the opportunity cost of keeping Chinese EVs out of Canada.

He says that if cheap Chinese EVs were available in Canada, they would supercharge EV adoption, adding more than 1.8 million zero-emission electric vehicles to our roads over the next decade and lowering our carbon emissions by almost 28 million tonnes.

Ultra-low-cost EVs would also free up more than $21.6 billion in family budgets (that’s $11,675 per family), he says — money that will now be spent on more expensive EVs, gas cars and gasoline instead.

Torrie says the tariffs are going to imperil our climate targets, drive inflation and dampen economic growth by eating up billions in disposable income.

What’s more, there are those who say the tariffs could end up failing to achieve their goal of fostering a local EV industry. Some who have seen Chinese EVs up close — including the CEO of Ford Motor — say they are so advanced and so cheap, legacy carmakers might never catch up.

In other words, they suggest, Chinese EVs are on track to dominate globally, and these tariffs could end up doing nothing but forestalling the inevitable.

Road transportation is responsible for 120 million tonnes of carbon emissions in Canada every year — about 17 per cent of all emissions nationwide. Globally, thanks to EVs, the transportation sector is one of the few that’s on track to reach net zero by 2050. But Canada lags behind.

Until only a few months ago, EVs appeared to have a magic power to bring erstwhile opponents together, with environmentalists and business leaders, Liberals and Conservatives, unions and management working to encourage the development of a domestic EV supply chain to reduce carbon emissions and provide a new generation of blue-collar jobs.

The tariffs, however, have shattered this alliance, with critics saying that economic development is being put ahead of emissions reductions.

“We can’t lose sight of the fact that getting affordable electric cars into people’s hands isn’t something that is optional. It is essential to achieving our climate goals,” wrote Nate Wallace, clean transportation program manager at Environmental Defence, in a submission to the federal government calling for lower tariffs. 

The No. 1 barrier to EV adoption: sticker price

The number one barrier to EV adoption is sticker price. Despite many studies showing the overall cost of owning an EV is cheaper in the long-run than a gasoline-powered car, they remain significantly more expensive upfront in the North American market — approximately 25 per cent, depending on the make and model.

In China, however, EVs have achieved price parity with cars powered by internal combustion engines across price points — from the cheapest models to the most luxurious — and the results speak for themselves: China leads the world in EV sales, with more than one third of all new cars powered by batteries. In fact, more than 60 per cent of all EVs bought globally are purchased in China.

For mass adoption to take off in Canada, EV prices would have to drop by one third to one half, according to a Scotiabank analysis put out last year. This is also how much cheaper Chinese EVs are today.

https://misc.thestar.com/interactivegraphic/2024/10-October/02-ice-western-ev-chinese-ev/index.html

Yet, EVs in Canada are only getting more expensive. The two cheapest models on the market — the Chevy Bolt and Nissan Leaf — were recently discontinued. They both retailed for several thousand dollars less than the cheapest models today.

“The only reason why low-priced electric vehicles from China pose any kind of threat to this industry is because the legacy automakers in North America have so far refused to bring affordable electric vehicle models to market,” Wallace wrote. 

Tim Burrows, president of the Electric Vehicle Society, a non-profit that promotes EVs as a climate solution, says the tariffs on Chinese EVs appear at first glance to be jumping the gun.

“There are no Chinese vehicles yet in Canada that would be impacted by the tariff,” he said. “We don’t have Chinese EVs and we have no EV industry to protect yet.”

Mark Carney, former governor of the Bank of Canada and now UN special envoy for climate action and finance, has questioned the lavish U.S. and Canadian subsidies to the auto industry to spur EV manufacturing, saying the money would be much better spent subsidizing heat pumps for households that can’t afford them.

But Burrows sees how tariffs are necessary to prevent cheap Chinese EVs from flooding the North American car market. Our auto industry needs time to catch up.

“The Chinese didn’t just show up with cheap, well-made EVs. They started 15 years ago. We’re just starting out.”

Burrows and other EV advocates take issue, though, with the lack of a sunset clause in the tariffs. If they were in place for a limited time — say, two to five years — with a clear end date, the tariffs would allow enough time to develop a North American supply chain and bring more inexpensive models to market. But as things stand now, they say, the tariffs coddle the domestic auto industry.

As Wallace put it: “No accountability mechanisms exist to apply downward pressure on EV prices, whether it be regulatory requirements or market-based competition.”

Chinese vehicles kick their bad reputation

Because they’re not available in North America, few people are familiar with Chinese car brands and can say with authority if they’re any good, or if they’d sell in North America.

Kevin Williams, however, is one of those people. A reporter with InsideEVs.com, he travelled to Beijing to test drive Chinese EVs and says that, in his view, they’re so good, Western automakers are “cooked.”

“Chinese EVs are competitive in ways that go beyond just price,” he said. “They’re stylish, they’re well-made and they work really well.”

Williams, who has not minced his words after test drives of lacklustre American EVs, says Chinese vehicles have bucked their reputation for inferior quality.

“For a long time, Chinese cars really weren’t great,” he said. “That isn’t true anymore.”

In the early 2000s, a lot of Chinese cars were simply cloned versions of Western cars that had been reverse-engineered. Then, in the late 2000s, automakers in China pivoted to EVs — or “new energy vehicles,” as they’re called there — and invested far more in their development. Now, 15 years later, Chinese manufacturers sell more EVs than all other car companies combined.

“They’ve been doing a lot of research and development, and refining their product to the point where now they’re the one of the biggest automakers in the world,” said Williams. “It didn’t happen in a vacuum. They didn’t just, all of a sudden, start making solid vehicles. It took a minute.”

Detroit-area company Caresoft Global, which takes apart cars to analyze how they’re built, tore down a BYD Seagull and was very impressed with the quality of its construction, especially for the price point. The company was similarly impressed with other Chinese EVs, and wrote, “The automotive landscape is set for a significant shift, driven by the rapid evolution of China’s electric vehicle industry and should serve as a wake-up call to legacy automakers.”

Williams said that if they were available in North America, there’s no doubt Chinese EVs would find eager buyers.

“Most consumers don’t care where the product comes from. I think if Americans or Canadians are ever given the opportunity to buy these vehicles, I think they would sell a lot stronger than a lot of Western automakers would think — and I think that’s really terrifying for them.”

In the 1980s, Japanese cars were cheaper and better than North American options and were being snapped up at a rapid clip. Then-U.S. president Ronald Regan imposed Japanese import quotas to allow the domestic auto industry time to catch up and, four years later, after Japanese companies agreed to open factories in North America, the quotas were dropped.

Now, Japanese cars are ubiquitous. But North American cars still exist — and they’re vastly more reliable than they were before competition arrived.

All EV supply chains lead back to China

One of the only places on Earth where Chinese EVs can compete head-to-head with Western vehicles is Australia, which has a free-trade agreement with China.

In Australia, Chinese-built EVs now control 80 per cent of the EV market, and Chinese brands are the most popular behind only Tesla.

John Cadogan, a veteran Australian automotive journalist and qualified mechanical engineer, is far less enthusiastic about Chinese EVs, calling them “a functional appliance.”

He says they’re good for people who can’t afford more expensive models, but can’t compete on quality.

“When you make anything cheaply, inevitably quality issues such as endurability and performance suffer,” he said. “Consumers are finding that out.”

But the line between Chinese EVs and others isn’t as clear as you might think, he said. Regardless of where they’re assembled, all EVs rely on numerous parts from China. From semiconductors to battery cathodes, even the raw minerals in batteries and the rare earths in electric motors, all cars — and especially EVs — are reliant on a supply chain controlled by China.

“It’s becoming very hard to differentiate what’s Chinese-made and what’s not,” he said.

As a result, as soon as EVs start rolling off the line in the U.S. and Canada, they’ll still be drawing from the Chinese supply chain, and that won’t change until new mines and refineries are up and running, a process that typically takes more than a decade.

Money left on the table

With tariffs in place, and few used EV options, budget-conscious Canadians may remain in the internal combustion engine market. This means another eight years, on average, of paying private-sector oil companies to fuel up rather than (mostly) publicly owned utilities.

According to Corporate Knights’ analysis, utilities would receive $3.5 billion in additional revenue over the next decade from the charging of Chinese EVs alone — badly needed funds that could be used to expand the grid to support electrification of the economy.

Without Chinese EVs providing inexpensive options, EV sales aren’t growing fast enough to meet the federal government’s legislated 60 per cent sales target by 2030 and 100 per cent by 2035. Estimates put out by the Parliamentary Budget Office show that EV prices would need to drop by one third in order to meet the first target, echoing Scotiabank’s figures.

Coincidentally, the cheapest Chinese EVs retail in Europe for about one third less than the cheapest EVs available in Canada.

And while the U.S. and Canada’s 100 per cent tariff leaves no room for negotiation or improvement, the European Union’s 38 per cent tariff has already been dialed back on several models, following an investigation into state subsidies.

Being more open to addressing specific grievances with Chinese EVs could create an incentive for China to improve its labour and environmental practices while increasing access to cheaper EVs in Canada. In France, for example, EV rebates are dependent on the car’s carbon footprint — only vehicles made with clean energy qualify.

Are the government and industry up to the challenge?

On the other hand, dropping the tariffs entirely and allowing Chinese EVs to flood the market isn’t a great option, observers say.

It would not only cede a critical industry to a geopolitical rival, it would support the objectionable labour practices and environmental degradation the Chinese EV supply chain relies on, not to mention open consumers up to potential spyware in their cars.

Instead, while market competition is good, government regulations — that is, limiting rebates to less-expensive EVs — could be necessary to drive down prices, says David Tracy, an automotive engineer and editor-in-chief of the Autopian, a car-focused online publication.

In the past, when the market has failed to protect consumers and the environment, the government has stepped up to make a difference, he said.

“I’m all about competition. But as someone who is well versed in automotive history, I’ve seen how really challenging automakers has led to great things. Throughout history, the greatest automotive innovations have been a result, oftentimes, of the government challenging automakers to improve.”

Fuel economy regulations in the U.S, for example, yielded cars that are more powerful, more reliable and more efficient than ever, he said.

“And that doesn’t happen naturally,” said Tracy. “I think if we just went by the market, it’s possible we’d still have carbureted automobiles without airbags.”

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