Tesla has started selling its Model 3 Premium RWD vehicles made in Shanghai in Canada at C$39,490, almost 50% less than the U.S.-made equivalent, leveraging a new trade agreement that drastically reduces tariffs on Chinese electric vehicles.
- Canada cuts EV tariffs on Chinese imports from 100% to 6.1% under new trade deal.
- Tesla’s Shanghai-made Model 3 sold in Canada at C$39,490, nearly half prior price.
- Deal opens doors for other Chinese EV makers like BYD in Canadian market.
What happened
Tesla is now selling Chinese-made Model 3 sedans in Canada at the lowest price the car has ever been offered in the country, C$39,490. This pricing is nearly half the cost of the Fremont-built Model 3 Long Range AWD previously available at around C$79,990. Tesla’s new offering comes from vehicles manufactured at its Giga Shanghai factory, taking advantage of a recent bilateral trade agreement between Canada and China.
This shift follows a complex tariff environment where Canada had imposed a 100% surtax on Chinese-made EVs in October 2024 and counter-tariffs on US-made vehicles in 2025. Tesla was effectively caught in a tariff squeeze on both supply sources, prompting the company to await a resolution that came with Prime Minister Mark Carney’s January 2026 trade deal with Beijing. The agreement significantly reduced tariffs on Chinese EVs and lifted some Canadian agricultural tariffs in return.
Why it matters
The new Canadian tariff quota on Chinese EVs, allowing tariffs to drop from 100% to 6.1% for up to 49,000 vehicles within the first half of 2026, represents a major strategic opening for Tesla and other Chinese manufacturers like BYD. This deals a significant blow to North American automakers protected by previous tariff measures, as it introduces competitively priced Chinese imports into the Canadian automotive market.
For Tesla, this move is particularly notable as it comes despite the company's close ties to the American leadership that endorsed the initial trade barriers. The ability to offer a Model 3 at nearly half the previous cost strengthens Tesla’s market position in Canada, enticing consumers with lower prices while highlighting the complexities of global trade and supply chain adjustments caused by geopolitical tensions.
What to watch next
Attention will now focus on how quickly Tesla ramps up deliveries of the Shanghai-made Model 3 in Canada and how this impacts sales volumes relative to the higher-priced US-made models. The pricing strategy and volume under the tariff quota will be key indicators of how aggressively Tesla intends to compete in the Canadian EV market going forward.
Stakeholders should also monitor whether other Chinese manufacturers leverage this deal to increase their footprint in Canada, potentially reshaping the competitive landscape. Additionally, the expansion of the quota to 70,000 vehicles by 2030 suggests a growing openness to Chinese EV imports that may exert long-term pressure on North American producers to adapt their strategies and pricing.