Germany’s automakers are getting crushed by Chinese competitors, and some are worried it’s a bleak preview of what could be in store for North America’s auto sector in the not-so-distant future.
Catch up: Volkswagen is considering a dramatic restructuring that would see it close four of its German plants and lay off as many as 100,000 of its roughly 625,000 workers. BMW and Mercedes-Benz have also warned that they will need to embark on cost-cutting efforts to cope with intensifying competition from Chinese automakers.
Why it matters: Industry observers see Canada as a possible beachhead for Chinese automakers to break into North America’s auto market — potentially with the same devastating impact on America’s Big Three automakers.
Canadian and American vehicle buyers have similar preferences and budgets, which makes Canada (as one industry expert put it to Reuters) a perfect “practice run for the U.S.”
Cars made in China are beginning to show up in Canada after Ottawa struck a deal with Beijing to allow 49,000 Chinese EVs to be imported at a reduced 6.1% tariff. In Mexico, cars made in China already make up nearly a quarter of the market (though they have fallen sharply after Mexico imposed a new 50% tariff this year).
Yes, but: The U.S. is likely to insist on keeping Chinese-made vehicles out of the North American market as part of a new CUSMA deal — it’s one of the few things Republicans and Democrats can agree on.
What’s next: Industry Minister Mélanie Joly has met with Chinese automakers to explore setting up joint ventures to make cars in Canada. But even that may be too far for the U.S. — last week it banned the sale of Polestar vehicles, despite some models being built in the U.S., under a law restricting the sale of cars with hardware and software connected to China.
