The divide over Chinese electric vehicles is becoming increasingly visible across North America. Ford CEO Jim Farley warned on September 29 that the United States should be “extremely careful” about how Chinese automakers enter the country, pointing to the pressure their rapid expansion has put on Europe’s established manufacturers. Canada, meanwhile, has already chosen a different approach. Ottawa replaced its 100% surtax on Chinese-made EVs with a tightly controlled annual import quota that allows qualifying vehicles to enter at the regular 6.1% tariff rate. The contrast puts two competing priorities into focus: protecting domestic manufacturing and technology while also responding to China’s growing advantages in EV scale, batteries, charging and cost. Ford itself sits directly in the middle of that tension, competing against Chinese companies while licensing and partnering with some of them.
Farley’s Warning Is Not a Call for Complete Separation
Farley’s message was more nuanced than simply shutting Chinese companies out of the automotive industry. Speaking at the Automotive News Congress in Detroit, the Ford chief said the United States needed to be “extremely careful” about how Chinese original-equipment manufacturers are allowed into the country. He argued that Europe demonstrated what can happen when fast-moving new competitors establish significant market positions before domestic manufacturers have fully adjusted.
At the same time, Ford is not pursuing complete technological separation from China. Farley said the automaker would continue working with Chinese companies when partnerships provide technology or expertise Ford needs and when the economics make sense. He also emphasized that Ford intends to compete directly with Chinese manufacturers. That combination—cooperation in selected areas while maintaining barriers around market access—captures the difficult position facing established automakers. Chinese companies are rivals capable of taking sales and market share, but they are also important sources of battery technology, manufacturing knowledge and increasingly sophisticated vehicle-development systems.
Europe Explains Why Ford Is So Concerned
Europe has become the example Farley uses when discussing what the United States should avoid. He said it was already “too late” for European countries to prevent Chinese manufacturers from becoming significant competitors. The numbers help explain the concern. Across the European Union, Britain and the European Free Trade Association, the combined market share of Chinese car brands reached about 11.3% in August 2026, up from roughly 7.1% a year earlier.
That expansion is occurring alongside a major European shift toward electrification. Battery-electric vehicles represented 21.7% of EU new-car registrations through August, compared with 15.8% during the same period a year earlier. Chinese manufacturers have been particularly well positioned to compete in that environment. BYD more than doubled its August European registrations from the previous year, while Chery and Leapmotor also recorded rapid gains. European companies remain much larger overall, but the speed of the change matters. Ford’s concern is less about one Chinese model suddenly dominating a market than about competitors gaining scale quickly enough to permanently reset pricing, technology and manufacturing expectations.
Washington Already Has Multiple Barriers Around Chinese Vehicles
The United States is starting from a dramatically more restrictive position than Europe. Chinese electric vehicles face tariffs exceeding 100%, making ordinary direct imports commercially difficult. Washington has also gone beyond tariffs by treating connected-vehicle technology as a national-security issue. A U.S. Commerce Department rule restricts certain Chinese-linked vehicle connectivity and automated-driving software beginning with model-year 2027 vehicles, while restrictions covering specified connectivity hardware phase in later.
Congress is considering making those restrictions even harder to reverse. The Connected Vehicle Security Act of 2026 was reported from the Senate Commerce Committee and would prohibit certain connected vehicles associated with foreign adversaries. Among its provisions is a threshold involving more than 15% Chinese ownership or control in some circumstances. That language has generated questions about companies with minority Chinese investors, including established non-Chinese automakers. Major U.S. automotive industry groups have also urged lawmakers to maintain strong restrictions. Farley’s remarks therefore arrive while Washington is debating not whether barriers should exist, but how broad and permanent those barriers should become.
Canada Has Deliberately Moved Onto a Different Track
Canada once closely resembled the United States on Chinese EV policy. Ottawa imposed a 100% surtax on Chinese-made electric vehicles in October 2024, on top of the existing 6.1% most-favoured-nation tariff. That policy changed dramatically in 2026 following a preliminary Canada-China arrangement. Effective March 1, the 100% EV surtax was repealed and replaced with a managed import quota.
The first-year quota permits up to 49,000 qualifying Chinese-origin electric vehicles to enter Canada at the 6.1% tariff rate. The quota is scheduled to increase by 6.5% annually. Canada divided the opening year into two periods of 24,500 vehicles, with unused capacity from the first six months carrying into the second period. The second period began September 1 and runs through February 28, 2027. This is not unrestricted market access: covered vehicles require shipment-specific import permits, and once the quota is exhausted, additional covered imports cannot simply continue under the same terms. Canada has effectively shifted from a prohibitive tariff to controlled competition.
Ottawa Is Still Putting Limits Around Its EV Opening
Canada’s system contains several safeguards that make the policy more restrictive than the headline tariff reduction might suggest. Global Affairs Canada currently administers the quota on a first-come, first-served basis and requires permits for covered imports. The rules also establish how Chinese origin is determined, meaning companies cannot necessarily avoid the system by shipping substantially Chinese-manufactured vehicle kits elsewhere for final assembly.
Affordability is built into the longer-term structure. Beginning in the second quota year, 10% of the quota is scheduled to be reserved for EVs with a free-on-board value of C$35,000 or less, with that proportion rising to 50% by the fifth year. At the same time, opening the quota does not mean Canada is subsidizing every China-built EV. The federal Electric Vehicle Affordability Program offers up to C$5,000 on eligible battery-electric vehicles in 2026, but eligible imported vehicles must be assembled in countries that have free-trade agreements with Canada. The government is therefore separating import access from federal purchase-incentive eligibility.
Canada’s Decision Has Opened a Major Industrial-Policy Debate
Ottawa has presented the quota partly as a way to increase affordable EV availability while encouraging Chinese companies to consider Canadian investment with trusted partners. Government documents say officials expect the arrangement could help catalyze joint-venture investment and strengthen the Canadian EV supply chain. The quota itself is relatively modest compared with the overall new-vehicle market, representing less than 3% based on the government’s initial calculations.
Canadian auto labour has reached a very different conclusion. Unifor has argued that giving Chinese manufacturers a foothold risks domestic auto jobs, supplier investment and future production. That concern is intensified by Canada’s dependence on its southern neighbour. Statistics Canada estimates that more than 93% of Canadian motor-vehicle exports went to the United States in 2025. Its research also found that U.S. demand accounted for 76.4% of Canadian automobile and light-duty vehicle manufacturing jobs in 2024. Canada can make its own import decisions, but its manufacturing industry remains deeply tied to a U.S. market pursuing much stronger restrictions on Chinese automotive participation.
Ford’s Own Strategy Shows How Complicated the China Question Has Become
Ford illustrates why drawing a clean technological line around China is difficult. In Michigan, the company is developing lithium-iron-phosphate battery manufacturing using technology associated with Chinese battery giant CATL. Ford says its BlueOval Battery Park Michigan is wholly owned and operated by Ford, while the company has worked with CATL to bring LFP manufacturing expertise into domestic production. By June 2026, Ford said more than 500 employees had been hired there, with a longer-term target of about 1,700 jobs.
Ford is also collaborating with Chinese automaker Geely in Europe. In July, the companies announced plans for a joint venture at Ford’s Valencia, Spain, plant that would manufacture Ford and Geely vehicles, including electric models, beginning later in the decade. Those relationships have attracted scrutiny in Washington; Transportation Secretary Sean Duffy publicly criticized Ford’s ties with Chinese companies in September. Ford’s response has emphasized domestic ownership and employment. The larger point is unavoidable: competing with Chinese automotive technology can sometimes involve learning from, licensing from or manufacturing alongside Chinese companies.
China’s Competitive Advantage Is Increasingly About Technology as Well as Price
Low prices remain an important part of the Chinese automotive story, but the competitive challenge has become much broader. The International Energy Agency estimates that China produced nearly three-quarters of the world’s electric cars in 2025. Chinese manufacturers also accounted for more than 80% of global battery-cell production, giving the country enormous influence over one of the most expensive and technologically important components in an EV.
Exports are expanding as domestic competition intensifies. The IEA says Chinese electric-car exports doubled to more than 2.5 million vehicles in 2025, while Reuters reported that total Chinese vehicle exports were expected to reach roughly 12 million in 2026, compared with around 3 million in 2022. Innovation is moving quickly as well. Geely recently demonstrated technology capable of charging a suitable battery from 10% to 70% in roughly 4.5 minutes under appropriate high-power conditions. Chinese manufacturers are also compressing vehicle-development schedules. That combination of manufacturing scale, batteries, software, charging and speed-to-market explains why traditional automakers increasingly describe China as a technological competitor rather than merely a source of inexpensive cars.
Canadian EV Demand Will Put the New Policy to a Real-World Test
Canada’s policy shift is occurring as electric-vehicle demand shows renewed growth. Statistics Canada recorded 58,811 new zero-emission vehicle registrations in the second quarter of 2026, up 26.7% from a year earlier. ZEVs represented 10.7% of all new registrations during the quarter, compared with 8.6% a year earlier. Battery-electric registrations alone increased 37.4% year over year.
The geographic source of those vehicles is changing as well. Statistics Canada found that 54.6% of new ZEVs registered during the second quarter were assembled in Asia, while 27.3% were assembled in North America and 18.1% in Europe. Those figures should not be read as Chinese-brand market share—Asian assembly includes vehicles from multiple countries and global manufacturers—but they show how international Canada’s EV supply already is. In July, ZEVs again represented 10.7% of Canadian new-vehicle sales, with volume rising 36% from July 2025. The quota will therefore be tested in a market where EV demand is meaningful but still far from dominant.
The Canada-U.S. Split Could Become a Test of Two Different Strategies
Canada’s decision does not erase the integrated nature of the North American automotive industry. More than 90% of Canadian-made vehicles are exported to the United States, according to federal figures, and components can cross the border repeatedly before a finished vehicle reaches a dealership. A divergence over Chinese vehicles therefore creates an unusual situation: Canada can permit controlled access to China-built EVs for its domestic market while the United States simultaneously strengthens barriers against Chinese automakers, software and connected-vehicle technology.
That difference may also make Canada an important proving ground. Reuters reported in June that Chinese manufacturers including BYD, Chery, Changan and Geely-linked brands were exploring or building their Canadian presence, with industry figures describing Canada as a useful test market because consumer preferences and vehicle standards resemble those south of the border. Success in Canada would not override American restrictions, however. For now, the two countries are testing different responses to the same competitive challenge: Canada is allowing limited market entry while Washington is moving toward tighter exclusion. Ford’s warning shows how closely the industry will be watching both experiments.
