Canada’s EV deal with China could hand nearly $1 billion to Chinese automakers from federal credits, experts warn

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When Prime Minister Mark Carney’s government agreed to allow up to 49,000 Chinese-made electric vehicles (EVs) into Canada at a steeply reduced 6.1 percent tariff, down from 100 percent, much of the media coverage focused on cheaper EVs, consumer choice, how the Chinese government subsidizes its car companies, and how Canada was exercising its sovereignty.

What was largely lost in the conversation is that the Canadian government could be subsidizing the Chinese cars sold in Canada at nearly $1 billion per year, via Canada’s zero-emission vehicle (ZEV) credit system.

“At 49,000 vehicles a year, that’s about $980 million annually in credit generation,” Brian Kingston, president of the Canadian Vehicle Manufacturers’ Association (CVMA), told The Hub. “You sell the car to the consumer, and then you turn around and sell the credit that you’ve generated from that sale to a manufacturer. You’re effectively selling the same car twice.”

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Under Canada’s federal ZEV mandate—which is currently under review and was suspended for 2026 by the Carney government last fall—automakers have to hit targets where a rising share of their sales must be EVs to lower emissions. In 2026, the first year quotas were supposed to be compulsory, 20 percent of cars sold from a car company under the mandate would have had to be EVs. By 2035, 100 percent would need to be EV under the current ZEV program’s targets.

Companies that fall short of the ZEV mandate would have to purchase credits from firms with surplus EV sales. Ottawa set the notional value of a credit at $20,000, based on the cost of installing charging infrastructure. Actual market prices of credits are negotiated privately.

“It makes no sense,” Kingston said. “The federal government is creating a revenue line for Chinese-headquartered companies at the expense of Canadian companies.”

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Even using [former Toyota Canada vice-president Stephen] Beatty’s most conservative credit value of $7,000 per vehicle, 49,000 imports would still equate to more than $340 million annually in regulatory income for Chinese automakers, paid indirectly by Canadian automakers and, ultimately, Canadian consumers.

“You’re going to be transferring wealth to China,” Beatty said.

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Both Kingston and Beatty point to China’s structural overcapacity as another underlying problem. Kingston estimates Chinese manufacturers now have two to three times more production capacity than their domestic market requires, supported by an estimated $230 billion USD in Chinese government subsidies, according to estimates from the Center for Strategic and International Studies (CSIS).

“They’ve gone from exporting one million vehicles to six million [in 2025 within a four-year span],” Kingston said. “They’re selling below market price to gain market share and push out competition.”

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