North America’s trade war against China may lead to a contracted electric vehicle (EV) market for North Americans, says a report by market research firm Gartner.
Gartner estimates EV (bus, car, van and heavy trucks) shipments will grow 17% in 2025. By 2030, Gartner predicts that more than 50% of all vehicle models marketed by automakers will be EVs.
That said, “trade barriers set by the U.S. and the EU against Chinese EVs will slow the adoption of connectivity, autonomy, software and electrification (CASE) in these regions, as Chinese EVs are, on average, the most advanced type of vehicles in these areas,” Gartner says in a website blog post.
“Chinese automakers have a competitive edge in software and electrification, supported by vertical integration and efficient development, enabling them to offer advanced, affordable EVs,” Gartner vice president Bill Ray writes. “However, increasing trade barriers may diminish this advantage, limiting the variety of competitive EV products for consumers…
“The ubiquity of intelligent, updatable software, remotely accessible cameras and the integration of data gathering into the automotive business model make it inevitable that geopolitics will fragment the market and, therefore, slow adoption.”
For the Canadian property and casualty insurance industry, anything slowing down the adoption of EVs in Canada would impact EV claims costs.
Claims for EVs increased by 3.94% in Canada in 2024 Q2, marking a year-over-year increase of 39%. Battery electric vehicles cost insurers an average of $6,534 to repair in 2024 Q2, compared to internal combustion engine (ICE) cars, which cost $4,958 to repair — a 31% difference.
Would these EV claims costs dip as a result of the looming trade war?
Some may argue the trade war against China in the EV market has already begun. On Oct. 1, 2024, the Canadian government imposed a 100% tariff on electric vehicles (EVs) imported from China, followed by a 25% tariff on Chinese steel and aluminum two weeks later.
But for Canada, these tariffs were imposed outside of the usual World Trade Organization mechanisms for resolving trade disputes, Bernard Colas writes in a blog posted by the International Centre for Governance Innovation.
“Canada’s decision aligns with a broader trend of tightening Western trade policies toward China,” Colas writes. “The 100% tariff on Chinese EVs, specifically, mirrors a similar policy announced by the United States in May 2024….
“Canada’s position differs from that of the United States on a crucial point, however: unlike its southern neighbour, Canada is party to the Multi-Party Interim Appeal Arbitration Arrangement (MPIA). Canada’s adherence to the MPIA means it is subject to a binding dispute settlement mechanism within the WTO, whereas the United States can adopt protectionist policies without fear of being called to order by the WTO.
“This difference could have significant consequences for Canada in its trade dispute with China — also a member of MPIA.”
Before Canada’s EV tariff was established in October, battery electric vehicle (BEV) registrations in Canada increased 57% from 2023 to 2024. Plug-in hybrid electric vehicle (PHEV) registrations increased by 75% over the first four months of 2024.
Standard & Poor’s attributes the increased adoption of EVs in Canada versus the United States as part of the Canadian federal government’s push to achieve climate change targets.
“Canada’s overall vehicle market is notably smaller than the U.S. market, but broader application of the Canadian national zero emissions vehicle (ZEV) rebates — as well as Canada’s decision to work toward a ban on ICE (internal combustion engine) vehicles by 2035 — are helping support faster adoption,” comments Stephanie Brinley, associate director of AutoIntelligence at S&P Global Mobility.
“Canadian provinces Quebec and British Columbia both offer incentives on top of the national government program, and those provinces see above-industry BEV penetration rates.”
The Quebec government has officially adopted a new rule banning the sale of most new gas-powered vehicles by 2035. An electric vehicle is charged in Ottawa on Wednesday, July 13, 2022. THE CANADIAN PRESS/Sean Kilpatrick
