Canada's electric vehicle (EV) market is at a turning point. Prime Minister Mark Carney's new strategic partnership with China reverses the previous 100% tariff on Chinese-made EVs, capping imports at 49,000 units per year at a most-favoured-nation (MFN) tariff rate of 6.1%. These imports will be split into two six-month tranches of 24,500 units each on a first-come, first-served basis.

There is significant opportunity in the EV market. Canada's EV adoption rate sits at approximately 15%. This number is well behind European peers, and the growth trajectory is steep. Further, Canada has historically served as the entry point for foreign automakers breaking into North America. Hyundai entered Canada in 1983 and built its brand there before expanding south. In Australia, a comparable economy with no tariffs on Chinese EVs, Chinese-manufactured vehicles captured 77% of the EV market within five years.

To help companies navigate this opportunity and complexity, Gowling WLG, in concert with the Canada China Business Council and with the support of the Canadian Embassy trade team in Beijing, hosted a webinar on March 11, 2026, bringing together specialists in trade, regulatory, IP, tax, corporate, and advertising law. Below are eight key takeaways from the event, which was hosted online with participation from around the world.

1. The quota is a managed opening, not a free market

Canada’s strategic partnership with China is a controlled, evolving framework. Each EV will require a shipment-specific permit from Global Affairs Canada, applied for 30 days in advance with a maximum validity of 60 days, creating real shipping and logistics planning considerations. From the 49,001th vehicle onward, the 100% tariff applies. Unlike a traditional tariff rate quota, there is no option to import above the cap at a higher rate.

The quota is expected to rise to 70,000 units by 2030. However, much remains undefined, including how the government will allocate future tranches and whether it will reward early movers or prioritize diversity among importers.

2. Structuring the importer-of-record relationship is a critical first step

Under the new framework, importers must use a Canadian-resident importer of record. That company or individual can act in an agency role to the foreign OEM, taking care of import formalities and potentially some regulatory requirements as well. Defining the scope of that agency and consultancy relationship is one of the most important practical steps in the supply chain: who acts as the agent, whether it is a related or unrelated party, what tasks they will undertake, and what the commercial agreement looks like.

If using the Appendix G pathway, the foreign manufacturer must also assign a Canadian importer of record and submit documentation to Transport Canada. The importer assumes statutory compliance exposure, even though the brand and recall risk remain with the manufacturer. Getting this structure right at the outset is essential to avoiding misaligned liability and operational confusion down the line.

3. The real price of entry is investment

The policy signal from Ottawa is clear: market access comes with an expectation of domestic investment. The federal auto strategy includes a productivity "super deduction," which can reduce the marginal effective tax rate for new investments to just 13.2%—the lowest in the G7.

This framework also includes a waiver of the $50,000 rebate cap for Canadian-made vehicles, a provision not extended to imports. This creates a powerful incentive for Chinese firms to localize production through joint ventures with domestic champions like Magna to unlock full federal rebates for premium models. Further supports include $3 billion in plant investment support through the Strategic Response Fund (SRF) and corporate tax cuts for zero-emission vehicle manufacturers.

Tax incentives are most meaningful when a company moves beyond pure import to Canadian manufacturing and R&D. An export-only model triggers straightforward obligations around import GST/HST and filing thresholds, but substantial benefits (accelerated deductions, SR&ED credits, and the full suite of federal incentives) unlock only with local operations.

4. Canadian regulatory compliance is self-certified but strictly enforced

Canada does not operate a pre-market approval regime. It relies on statutory self-certification, with Transport Canada enforcing post-market through audits, testing, and defect investigations.

There are several viable pathways into the market. Establishing a Canadian subsidiary and certifying directly provides maximum control but also risk exposure. Appendix G, a Transport Canada pre-clearance program, allows vehicles from registered foreign manufacturers to enter without case-by-case border inspection. Following a comprehensive review, Transport Canada officially reopened the Appendix G intake for new passenger car and multi-purpose passenger vehicle applications on February 28, 2026. Case-by-case authorization is suitable only for pilot volumes. Notably, one Chinese automaker has maintained a significant lead in this area, as its plants were already registered under Appendix G prior to the 2025 application pause.

To resolve national security bottlenecks during certification, Industry Minister Mélanie Joly has suggested the use of Canadian-made software (such as BlackBerry’s QNX) to serve as a "safe harbour" against data sovereignty concerns in connected vehicles.

Canadian standards are closely aligned with US standards and often aligned with EU and Australian requirements. Beyond the Motor Vehicle Safety Act, imported EVs must also comply with the Plant Protection Act and the Motor Vehicle Tire Safety Regulations. Transport Canada operates a robust recall regime with mandatory adverse-event reporting. Battery end-of-life and disposal is an emerging regulatory obligation that companies should factor into their strategies early.

5. Protect your innovation: IP strategy must be part of market entry

Canada offers a favourable landscape for patent protection. A 12-month grace period allows companies to file even after public disclosure. Canada also operates a green technology accelerated examination program that can fast-track EV-related patents (covering drivetrains, battery systems, and charging infrastructure) at no additional cost. The charging standards transition, from a multi-standard environment to one or two dominant standards, also creates a "golden window" for patent filings directed at solutions that address interoperability challenges arising from this convergence. Key areas of patentable innovation include, among others, control algorithms for cross-standard compatibility, safety protocols governing multi-standard charging infrastructure, and user authentication mechanisms that operate seamlessly across different charging platforms.

Structuring IP ownership correctly is critical. It is important that companies demonstrate a local IP presence, by ensuring that a Canadian entity either owns or holds exclusive licences to at least some of the key patents, which improves access to government grants, public procurement opportunities, and policy support. There are several federal and provincial IP funding programs, but they generally expect some level of local IP ownership or exclusive licences.

Joint venture and co-creation arrangements require particular care. Under Canadian law, each co-owner of a patent can independently license or transfer their share without the other's consent, provided that such licence or transfer does not dilute or otherwise diminish the interest of any other co-owner in the patent. Joint development agreements should therefore require mutual consent for third-party licences, clearly define background and foreground IP ownership before collaboration, and address improvement rights. Employment contracts must include explicit invention assignment clauses.

Canada has no federal trade secret statute. Protection comes entirely from contracts and common law. Confidentiality agreements must be carefully crafted and consistently enforced, particularly given that non-compete clauses are now largely banned in Ontario. Employers should prioritize enforceable confidentiality obligations, restrict access to sensitive systems through role-based permissions, and implement technical controls such as encryption and access logging to safeguard proprietary information. In addition, employers should consider segmenting their most sensitive know-how across teams or functions so that no single employee has complete access to any critical body of confidential information.

6. Earning Canadian consumer trust means getting advertising right

Canadian consumers are practical and risk-averse, consistently ranking safety, reliability, and value above innovation and luxury. Claims relating to range, battery life, safety, and durability are classified as "performance claims" under federal law and must be supported by adequate testing before going to market. This testing should be conducted on models in Canadian conditions, including extreme cold.

Public sentiment is shifting rapidly in favour of Chinese entrants. A February 2026 Nanos Research poll for Bloomberg revealed that 53% of Canadians say a vehicle’s Chinese origin would have "no effect" on their purchasing decision, up from just 25% in 2024. Furthermore, data from Leger indicates that 61% of the public supports the arrival of Chinese EVs, with support reaching as high as 72% in Quebec.

Approximately 75% of new vehicles in Canada are leased or financed rather than purchased outright, making lease and finance advertising rules critically important. Quebec, with its distinct language laws requiring French as the language of commerce, presents unique requirements.

7. Provincial variation in warranty and consumer protection is real

Canada is a federal country with 13 sub-national jurisdictions, and consumer protection is largely a provincial matter. Warranty claims, battery durability representations, resale value statements, and savings representations must align with both provincial consumer protection laws and the federal Competition Act. Extended warranty agreements, prepaid maintenance programs, and lease and finance contracts are all regulated differently depending on the province.

Quebec stands apart with the strictest consumer protection regime in the country. Carefully structuring these agreements at the outset, with province-specific variations built in, is essential. Companies that have done well in Canada combine a strong product offering with a thoughtful, provincially-aware market entry strategy.

8. Getting boots on the ground: practical steps for setting up in Canada

Foreign companies entering Canada typically incorporate a Canadian subsidiary. British Columbia, Alberta, and Ontario are the preferred jurisdictions because they have no foreign residency requirements for directors. Federal corporations require 25% Canadian-resident directors and carry transparency register obligations that can be onerous for foreign-owned enterprises.

Setting up a Canadian bank account is an early priority but can be time-consuming. Canadian banks are conservative, and anti-money-laundering and know-your-client requirements are rigorous. An accounting firm should be engaged immediately after incorporation, since even a zero-revenue corporation must file taxes annually in Canada.

Employment law in Canada is more akin to the European model than the American one. Employees cannot be dismissed at will, and severance obligations scale with age, tenure, specialization, and seniority. Employment agreements should include strong IP assignment clauses and confidentiality provisions. Bringing employees from China requires work permits, and the lead time and complexity of the immigration process should not be underestimated.

Lastly, the Investment Canada Act's national security review process has historically been a significant friction point for Chinese investors, with Chinese investments being the greatest source of national security reviews in Canada. However, the Carney deal signals cautious openness at the federal level, even as the geopolitical landscape remains fluid.

Looking ahead

For companies evaluating this market, success is about building trust with consumers, with regulators, and with partners. Canada is a welcoming place to do business, but it is a legally structured market where early, thoughtful planning across trade, regulatory, IP, tax, and branding dimensions will separate the companies that thrive from those that stall.