Commentary: The Chinese Are Coming (The Canadian Edition)?

The news cycle has been focused on a slew of automotive-related content, all focusing on one place: China. 

The headlines have been quite compelling. Chinese automakers are making inroads into the rest of Asia, Australia and New Zealand, Europe, South America, the Caribbean, Mexico and Canada. But, not America. Not with mixed signals from the likes of the President of the United States and Ford CEO Jim Farley. 

So far, their impact on the rest of the world has been astounding. In Australia, the latest sales figures show that BYD is now the second-leading automaker in that country. They are driving the growth in electric vehicles, which now account for one of out six units sold across all brands. Interestingly enough, the BYD Sealion 7 has outsold the Tesla Model Y down under. 

In Europe, Chinese automakers are on the rise, with MG in the lead. As a unit of SAIC, MG is a reborn British brand that has focused from sporty models to SUVs. They do sell an electric roadster – the Cyberster. BYD and Chery, along with their associated brands, are also on the rise on the other side of the Atlantic Ocean, even though Geely has a stake in Volvo and Polestar. In all, one out of 10 vehicles across Europe are of Chinese origin. 

South of our border, Mexico has seen growth by Geely and MG. Both are leading the move towards competing against the nation’s leading automakers – Nissan and General Motors. 

How did we get to this increase in noise about the Chinese automotive industry and its long-shot potential entry into the USA market?

Look no further than Canada. Earlier this year, both China and Canada agreed to a trade deal that would bring up to 49,000 vehicles from across the Pacific at a lower tariff rate. Since that announcement, speculation ran high as to which automakers will make landfall in Vancouver and other ports of call north of our border. 

So far, BYD hinted on coming to Canada. Chery has vehicles being tested in the Toronto area. It is also reported that Geely has vehicles en route to Canadian ports. Those are the only three Chinese automakers that have mentioned Canada as a market for them. 

That’s great…for Canada. Or, is it?

Let me take you back some decades in the past. Remember when Lada and other Soviet bloc automakers tried their hand at selling vehicles north of the border? From the late 1970s, Lada, Skoda, and Dacia were selling new vehicles at Canadian dealers at very affordable prices. In 1983, Lada actually sold 43,000 units up north. The Russian automaker lasted in that market until 1997 with the Samara hatchback and Niva SUV as the last vehicles sold there. 

For another set of context, Hyundai led the delegation from the Republic of Korea with the Pony in 1983. They have remained in the Canadian market on the strength of their lineup and popularity up north. 

It takes some time to establish a beachhead of dealerships, service centers, and parts distribution points in any market – here included. What makes any consumer hungry for an “affordable” vehicle from China think they’ll show up tomorrow? 

Another subject that has been discussed in context of the impending arrival of Chinese automobiles in Canada has to do with something the automotive industry has been debating on – available production space. Not building a new factory in North America, but available capacity at current assembly facilities. 

For example, CNBC cited in a recent report that the Volvo Cars facility in South Carolina has capacity that is currently underutilized. Given that Volvo and Polestar assemble vehicles at that plant, they figured that their parent company, Geely Holdings, could fill up the assembly lines from their extensive lineup from China. You could reduce the tariff impact by doing so. Even more so when they’re using common components with Volvo and Polestar vehicles. 

In Canada, there is also some factory space that are underutilized – including plants that have not seen production activity in years. If some deal is made to fill those production capacity gaps, then you have a better chance at not only lowered tariffs on these vehicles, but a series of wins for the Canadian auto industry and its workforce. 

There is one flip side to Chinese auto ownership in Canada. The administration has instructed the Department of Homeland Security to not let any Chinese vehicle cross our borders. If it seems draconian, a similar rule was put into place when Lada began selling up north in her late 1970s. It took after the fall of the Berlin Wall to loosen that restriction – until now. 

Again, what about the USA market? When can we see more Chinese-made vehicles that will cost less than their counterparts? The business case is there, despite some challenges. If Geely Holdings want to add Zeekr production in South Carolina with EV parts from Volvo and Polestar, there’s that opportunity. But, full imports? Not unless there is a trade agreement down the line. 

Consider this: The typical Chinese-built automobile is sporting a higher level of quality than expected. We’re talking miles further than a 1986 Yugo – or, a late 1980s Hyundai or the first Kia Sephias in the early-to-mid 1990s. 

For now, we’ll watch how Canadian automotive consumers react to the first Chinese automobiles hitting their respective dealer lots. 

All photos by Randy Stern – unless otherwise noted