On Monday, Canada announced its decision to impose 100% import tariffs on China-made electric vehicles (EVs), effective October 1. The country joins the U.S. and the European Union, which recently declared additional tariffs on EVs imported from China to ensure fair competition and address concerns over the unfair subsidies enjoyed by Chinese EV makers.
Additionally, Canada will slap a 25% tariff on Chinese steel and aluminum imports from October 15. The move is expected to protect domestic workers and encourage local production.
Interestingly, last week, the EU lowered its proposed tariffs, providing some relief to Tesla (TSLA) and other auto companies like BYD (BYDDY), which export their China-made EVs.
Tesla Could be Hit by Canadian EV Tariffs
Tesla, which began shipping the EVs made at its Shanghai factory to Canada last year, is one of the EV makers that could be impacted by the hefty import tariffs announced by Canada.
However, experts think that the company might try to avoid these tariffs by exporting vehicles from its U.S.-based factories to Canada. That said, such a move might weigh on Tesla’s margins due to the higher costs of the U.S. production base compared to the company’s Shanghai factory.
Currently, Canada levies a 6.1% tariff on EVs imported into the country from China. Canada’s decision to protect domestic players comes amid a significant surge in imports of China-made vehicles. According to Reuters, imports of automobiles from China to Vancouver, Canada’s largest port, surged 460% to 44,356 units in 2023.
Canadian Tariffs Might Discourage BYD’s Expansion Plans
Currently, major China-based EV makers, including Nio (NIO) and XPeng (XPEV), have a presence in Europe but have not yet started importing their vehicles to Canada.
That said, the news could impact BYD’s expansion plans into Canada. Last month, executives of the company’s subsidiary, BYD Canada, reportedly met Canadian government officials to discuss its expansion plans, including opening retail locations with dealers. BYD and other Chinese EV makers are seeking growth in Europe and other international markets due to intense competition in the domestic market.
Is Tesla a Buy, Sell, or Hold?
Tesla shares have declined 14% so far this year due to concerns over the company’s declining margins and weak sales amid rising competition. Continued macro pressures and adverse developments, like the Canadian import tariffs, could further drag down the stock.
Wall Street is currently sidelined on Tesla stock, with a Hold consensus rating based on 10 Buys, 14 Holds, and seven Sell recommendations. The average TSLA stock price target of $211.46 implies shares are fairly valued at current levels.
