Hyundai Positioned for Growth as Chinese EVs Exit Canada

Major Chinese electric vehicle (EV) manufacturers, including industry giants BYD, Chery, and Geely, are significantly curtailing their ambitious expansion plans into the Canadian market. This shift comes as Canada, a crucial entry point to North America beyond the US — where escalating anti-China trade policies have largely excluded Chinese EVs — implements new import restrictions.

Industry experts suggest this strategic realignment could create a substantial opportunity for Hyundai Motor Group, encompassing Hyundai and Kia, to solidify its position in Canada’s highly profitable automotive sector. Demand for high-margin SUVs, hybrid vehicles, and other eco-friendly models continues to show robust growth in the region.

According to a recent report from Automotive News Canada, BYD, Chery, and Geely are actively reassessing their timelines for entering the Canadian market. Initial launch plans for this year are now potentially being pushed back to 2027, reflecting the new market realities.

A primary factor in this reconsideration is the Canadian government’s newly introduced quota system for China-made EV imports. This system, which came into effect earlier this year, replaces previous 100 percent tariffs. It limits total Chinese EV imports to 49,000 units in 2026, with a modest annual increase of 6.5 percent thereafter.

While initially appearing less stringent than outright tariffs, the limited import quota introduces significant uncertainty for Chinese brands. They now face fierce competition not only among themselves but also against established players like Tesla, a dominant force in Canada’s EV landscape, for a share of this restricted allocation.

Tesla, which imports popular entry-level models such as the Model 3 sedan from its Shanghai Gigafactory, is reportedly expected to secure approximately 24,500 vehicles. This would account for a substantial half of the total quota allocation, further intensifying the challenge for other Chinese automakers.

Lee Ho-geun, an automotive engineering professor at Daeduk University, emphasized that this quota system presents greater hurdles for Chinese EV makers than the previous 100 percent tariff. “Earlier this year, I visited China to study automotive production costs, and the findings suggested that some vehicles were being sold at roughly half the estimated production cost for Korean companies,” Lee noted, “meaning that Chinese companies significantly benefit from government subsidies.”

Professor Lee further elaborated that extensive government support typically allows Chinese companies to maintain profitability even under steep tariffs by relying on high-volume sales. However, once imports are capped by a strict quota, the economic incentive for Chinese brands to aggressively pursue expansion into the Canadian market becomes significantly diminished.

As Chinese competitors grapple with recalibrating their market strategies, Hyundai Motor Group is poised to gain valuable ground and expand its robust presence in Canada, North America’s second-largest automotive market.

Unlike the unpredictable US tariff environment or the lower-margin Mexican market, which primarily focuses on gas-powered, compact vehicles, Canada offers a comparatively stable, free trade agreement (FTA)-protected market. Here, the demand for high-priced SUVs and environmentally friendly models creates a fertile ground for more profitable growth for the Korean automaker.

In 2025, Hyundai and Kia achieved record sales in Canada, moving 249,028 units — a notable 10.5 percent increase from the previous year. Their top-selling models include the Hyundai Tucson SUV, Kona SUV, and Kia’s Avante sedan, Sportage SUV, and Seltos SUV, showcasing their strong SUV lineup.

The Korean duo’s comprehensive powertrain mix, encompassing traditional internal combustion engine vehicles, hybrids, plug-in hybrids, and battery electric vehicles, played a crucial role in boosting their market share last year, effectively narrowing the gap with Toyota, the third-largest automaker in the region.

Mirroring trends in the US, hybrid vehicle sales witnessed remarkable growth in Canada, capturing 17.2 percent of the market in 2025, up from 13.3 percent in 2024, according to data from S&P Global Mobility. This trend bodes well for Hyundai and Kia’s diverse eco-friendly offerings.

Kim Pil-su, an automotive professor at Daelim University, highlighted Canada’s potential as a strategic market for Hyundai and Kia. He suggests it offers stronger profitability prospects compared to many emerging markets in Southeast Asia, India, and Latin America, where sales often concentrate on lower-margin vehicles. While the group’s diversification into these regions boosted overall sales volumes, it also placed pressure on operating profit.

Professor Lee Ho-geun echoed this sentiment, stating, “Like the US, Canada boasts relatively high income levels, with the average vehicle transaction price hovering around $50,000. This economic environment creates favorable conditions for Hyundai Motor Group to significantly expand sales of its popular SUVs, eco-friendly vehicles, and premium Genesis brand models, thereby strengthening both revenue streams and overall profitability.”

According to Lee, Canada is not directly involved in the geopolitical rivalry with China in the same way the US is. However, its unique position as primarily an auto consumption market, rather than a major vehicle-exporting nation, affords it the flexibility to impose tougher import measures.

“While the main reason would undoubtedly be to counter China’s expanding influence in the global EV industry, there could be additional underlying contexts,” Lee explained. He pointed to Canada’s increasing interest in bolstering ties with Korea, particularly in relation to its significant 60 trillion won ($39.8 billion) submarine bid. As part of this potential deal, Ottawa has actively encouraged Korean automakers, specifically Hyundai and Kia, to consider establishing manufacturing facilities within Canada.

Historically, Hyundai Motor Group has exercised caution regarding significant investments in Canada due to the market’s relatively limited size. Nevertheless, Canada’s strategic decision to cap Chinese EV imports could now create meaningful opportunities for other global automakers, including Hyundai, to seriously explore local production options.

“If the North and South American trade blocs continue to deepen free-trade frameworks, allowing for tariff-free vehicle movement across the region, Hyundai would have fewer reasons to avoid establishing production facilities there. The company will likely need to proactively prepare for such a possibility,” Professor Lee concluded, pointing to a potential shift in Hyundai’s long-term regional manufacturing strategy.

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