Tesla is selling Model 3 sedans built in Shanghai, Canada for C$39,490, nearly half the 79,990 of the model that comes from the Fremont, following Premier Carney's trade deal with Beijing in January 2026, which reduced tariffs on Chinese electric vehicles from 100% to 6.1% under a quota of 49,000 vehicles.
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Tesla is the first company to take advantage of the deal, which also opens the Canadian market to BYD and other Chinese electric vehicle manufacturers.
Canada imposed a 100% tariff on Chinese electric vehicles in October 2024, matching the tariff imposed earlier that year by the United States. The broader technological competition between the U.S. and China has created tariff walls on semiconductors, artificial intelligence and electric vehicles, and the additional tax on electric vehicles was part of that trend: a policy designed to protect domestic and North American automakers from the cost advantage that Chinese electric vehicle manufacturers had built, supported by vertically integrated battery supply chains and lower labor costs, over the previous decade.
Tesla, which had been shipping Model 3s manufactured in Shanghai to Canada, has shifted its Canadian supply to the Fremont factory.
Then the trade landscape changed. In early 2025, Canada imposed a 25% on U.S.-made vehicles in response to U.S. tariffs on Canadian products. The Model 3 Long Range AWD , already expensive at Canadian exchange rates, became unaffordable at C$79,990. Tesla was caught between a 100% tariff on its Chinese cars and a 25% tariff on its American ones. Neither supply route was economically viable at a price that Canadian consumers would accept.
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In January 2026, Carney visited Beijing and signed what he called a “preliminary but historic” trade deal. Canada reduced the tariff on Chinese electric vehicles from 100% to 6.1%, the standard most-favored-nation rate, under a quota of 49,000 vehicles for the first half of 2026. A second allocation of 24,500 vehicles covers the period from September to February 2027. The quota will expand to 70,000 vehicles annually by 2030.
In return, China cut tariffs on Canadian canola seed from about 85% to 15% and removed discriminatory tariffs on Canadian lobster, crab and peas. It was a trade deal in the old sense: agricultural products for industrial goods, negotiated bilaterally while the country that usually brokered such deals was busy imposing tariffs on both sides.
Giga Shanghai delivered 851,000 electric vehicles in 2025, more than half of Tesla’s total global production, and has now built more than four million cars since it opened. The factory’s cost advantage over Fremont is structural: lower labor costs, a more efficient supply chain, and proximity to battery material and component manufacturers that dominate global electric vehicle production.
When the tariff gap between Chinese and American vehicles narrows enough, as it has in Canada, Shanghai becomes the obvious source. Tesla doesn't choose China over America for ideological reasons. It chooses the factory that makes the car cheaper.
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The 49,000-vehicle quota is not exclusive to Tesla. BYD, Geely, SAIC and any other Chinese electric vehicle manufacturer can apply for import permits under the same terms. Atto 3, Dolphin and Seal , which directly compete with the Model 3 in price and specifications, could enter Canada at prices significantly lower than their current levels.
