China cars land in Canada: The real test begins after enthusiasm fades

"China's electric vehicles will be eye-opening."

In May this year, Canadian dealer Michael McGillivray, who participated in a trip to China, commented on China's new energy vehicles in this way. He owns 8 distribution stores and was actively looking for opportunities to represent China brands.

Similar enthusiasm is not uncommon among Canadian dealers. In April this year, DSMA, a Canadian car dealer consulting agency, said it had received about 150 applications from Canadian dealers to cooperate with China car companies. Another previous survey showed that more than half of Canadian consumers are also willing to consider buying China cars.

An AutoPacific survey of more than 1800 Canadian consumers showed that 55% of the respondents said they might buy China brand cars in the future, and price, quality and cost performance are the main attracting factors.

However, just a few months later, market sentiment is cooling rapidly. "The initial enthusiasm has subsided," said Samir Akhavan, general manager of Canadian car brokerage firm Templeton Marsh.

The reason for the retreat is not that China's automobile products are not competitive enough, but that when they really enter the commercial operation stage, dealers find that the problem before them is far more complex than imagined: Where do the vehicles come from? How to solve the problem after sales? Who will bear the warranty? How can stores make profits?

Canada's liberalization of imports of electric vehicles from China was once considered an important breakthrough for China cars to enter North America. In January this year, Canada granted China a low-tariff import quota of 49,000 electric vehicles per year, and vehicles within the quota enjoy a 6.1% most-favored-nation tariff. Since then, the quota has increased by 6.5% annually. China car companies such as BYD, Chery, and Geely have rapidly promoted the layout of the Canadian market.

But the problem is that these 49,000 vehicles do not belong to a single company, but are shared by all China brands, vehicles made in China and some global brands.

As of July 14, Canada had actually imported only 6531 electric vehicles made in China, accounting for only about 25% of the quota for the first half of 2026. A large number of these vehicles do not come from China's own brands, but are Model 3 produced by Tesla's Shanghai factory.

This means that the real question facing China car companies is not "whether they can enter Canada", but "how much can they sell after entering."

However, for car dealers, stabilizing vehicle sources is more important than low tariffs.

In core cities such as Toronto, Vancouver, and Montreal, it takes millions of Canadian dollars to build a new car store, and a store usually needs to continue to sell hundreds of cars to be close to profitability. If the import quota cannot be guaranteed, dealers cannot predict future sales or formulate long-term business plans.

The Canadian Dealers Association is also aware of this risk. In April this year, the association issued a warning to about 3500 member companies, advising dealers to be cautious when cooperating with China car companies newly entering the Canadian market, and focusing on the direct sales system, after-sales responsibilities and terms of cooperation agreements.

At the product level, the advantages of China's automobiles are beyond doubt.

After visiting factories in China and the Beijing Auto Show, Canadian dealers were generally impressed by the design, configuration and manufacturing level of China cars. McGillivray once said that China cars are "second to none in materials, stunning appearance, and excellent driving experience."

But the automobile industry has never been a purely product competition. Traditional brands such as Toyota, Honda, and Volkswagen can still occupy the market for a long time even if their products may not have the most advanced intelligent configurations. This is largely due to the mature dealer network, parts supply system and after-sales service system behind them.

For Canadian consumers, buying a new car is not a simple transaction, but a consumer relationship that lasts for ten years.

If there is a problem with the vehicle, is it convenient to repair it? Are parts supplied in a timely manner? Will the brand still exist a few years later?

These problems were not prominent in China car companies in the domestic market in the past, but when they go to overseas markets, they will be amplified infinitely.

Paul Anthony, CEO of Canadian investment services company MAP Investco, pointed out that traditional brands have long-term sales data, which dealers can plan based on, but China brands have no operating accumulation in Canada. Coupled with policy uncertainty, it is difficult for dealers to judge future benefits.

Changes in Canada's market have also affected the strategies of China car companies themselves.

Previously, it was expected that BYD, Chery and Geely would rapidly expand their sales networks in Canada. But now, all three companies are beginning to adjust their pace.

Consulting firm DSMA said BYD, Chery and Geely are still moving forward with Canada plans, but have shifted from national expansion to cautious piloting, and may only build a small number of dealerships in major Canadian cities in the short term.

The reason is very realistic: import quotas are limited, and large-scale construction of channels is meaningless.

A store requires millions of Canadian dollars, but if you can only get a limited supply of vehicles a year, a business model is difficult to establish.

Previously, China's cars relied more on the "product advantage + price advantage" model when going abroad, but the Canadian market proved that after entering a mature market, manufacturing capabilities alone are not enough.

In the long run, if China car companies want to truly take root in Canada, localized production may be an unavoidable step.

Canadian consulting firm AlixPartners believes that although the Canadian market is limited in size, it has high strategic value. If China car companies can produce models in Canada, then only issues such as sales qualifications and trade licenses remain before entering the U.S. market.

In fact, the Canadian government is also promoting cooperation with China car companies. In June this year, during Canadian Industry Minister Melanie Jolie's visit to China, she met with relevant leaders of Chery, Geely and BYD.

But building a factory is not the short-term answer. Factory investment involves supply chain, local employment, policy support and huge capital investment, and cannot be completed quickly.

Therefore, the development of China automobiles in Canada is likely to enter a longer stage: short-term, small-scale pilot projects to establish sales and after-sales systems; long-term, localized production to break through import restrictions.

The cooling of the Canadian market does not mean that China cars have lost their competitiveness. On the contrary, it shows that China cars are facing a more complex problem:

In the past decade or so, China car companies have solved the problem of "building good cars." Now that they are entering the global market, what they need to solve is "how to run a global car company."

Source: Leading the way to the sea by Gaoshen's car

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