Madam Chair and committee members, thank you very much for the opportunity to appear before the committee today, on behalf of the 15 members of the Global Automakers of Canada, to discuss the important topic of Chinese electric vehicle entry into the Canadian marketplace.
For context, GAC member companies employ 110,500 people in Canadian dealerships, vehicle assembly plants, national and regional offices, captive finance companies, and transportation and logistics facilities. The activities of GAC member companies support an additional 107,000 jobs across the country and contribute more than $24.9 billion annually to the Canadian GDP. These activities generate more than $10.6 billion in government revenue annually.
At the outset, it's important to underscore that all auto distributors in Canada are importers. While five companies manufacture in Canada, the vast majority of their production—85% to 90%—is destined for the U.S. market. Most of the vehicles sold in Canada come from somewhere else. The U.S. supplies 18.3% of the vehicles GAC members sell here. Mexico supplies almost 24%. Vehicles from elsewhere around the globe come in at 43.4%. Canadian manufacturers, through Honda and Toyota, supply almost 15% of the vehicles sold here.
This reality underscores the importance of having a fair, transparent and rules-based environment for any new entrants—Chinese or otherwise—looking to distribute vehicles in Canada, in order to ensure a competitive marketplace for all. Some of the measures contributing to a fair, transparent and rules-based environment include adherence to Canadian motor vehicle safety standards and Canadian emissions standards; supporting consumers by ensuring that sold vehicles can be repaired and serviced at a physical service location; mandatory participation in industry MOUs—principally with Transport Canada—that existing vehicle manufacturers abide by as a means of achieving regulatory outcomes through alternative mechanisms; and mandatory participation in a myriad of industry programs and dispute resolution processes.
Committee members will recall that the 100% tariff on EVs, including conventional hybrids, battery electric vehicles and plug-in hybrids, came into effect on October 1, 2024, via an order in council referencing section 53 of the customs tariff in order to address unfair trade practices that adversely impact the trade of Canadian goods and services. The RIAS supporting the OIC at the time indicated concern that “China's non-market support for its electric vehicle (EV) sector could lead to an exponential surge of imports that could adversely affect the transformation and planned investments in Canada's vehicle sector.”
It is also worth noting, as others have mentioned, that Canada has not yet established any regulation similar to the information and connected technology and services for connected vehicles regulation that was implemented last year in the United States. This regulation bans vehicle connectivity systems and advanced driving system technologies linked to foreign adversaries, with a software ban coming into place for model year 2027 and hardware bans being implemented for model year 2029 and model year 2030. This would seem to be another area Canada should explore further to ensure that personal information and privacy, as well as cybersecurity and national security, can be safeguarded.
The announcement in mid-January of the government's intention to allow 49,000 EVs into the Canadian marketplace, a quota that will increase each year, seems to discount the initial rationale for imposing the tariff in the first place. It also represents an initial irritant, as others have commented on, to the U.S. administration at a time when we are heading into a sensitive first review of the USMCA. While the quota represents a small portion of overall Canadian sales, as Brian mentioned, it represents 30% of EV sales.
It remains unclear whether this action will achieve the policy goal of providing Canadians with more affordable EVs and encouraging joint-venture production of vehicles in Canada, which would presumably be reviewed under the Investment Canada Act. Clearly, the greatest value added for Canada would arise from utilizing the Canadian supply chain for parts and components, as well as Canadian labour. All issues are linked in the automotive industry, and this decision has ramifications for environmental policy, trade policy, industrial policy and national security.
From the perspective of the members of the Global Automakers of Canada, it is important that Canada establish the appropriate guardrails now with respect to any new entrants coming to Canada in order to ensure a level playing field for competition and for the privacy and security of consumers purchasing their vehicles.
Thank you. I look forward to answering your questions.
