By Vina Nadjibulla

June 17, 2026

In the inevitable hot-mic moment at this week’s G7 in Evian, France, Prime Minister Mark Carney summarized for President Donald Trump Canada’s new electric vehicle arrangement with China. Carney is overheard reassuring Trump that there’s a cap of 49,000 Chinese EVs imported under the deal.

But the real story of how China’s global auto-industry ambitions are playing out in Canada is unfolding elsewhere.

Industry Minister Mélanie Joly is in China this week meeting four Chinese automotive companies interested in producing electric vehicles in Canada.

Joly has identified four conditions for any proposed Chinese EV manufacturing venture: it must take the form of a joint venture that is majority Canadian-owned, respect Canadian labour standards, use Canadian parts and ensure that vehicle software is secure and users’ data protected.

These are sensible conditions. But they are not sufficient.

In her interview with The Globe and Mail, Joly further described her mandate as reconciling affordability, technological advancement and employment. “What is important is how can we make sure that we offer great vehicles to Canadians that are actually affordable, and with the latest technology, while keeping and protecting our 500,000 auto workers,” she said. “My job is to square that circle.”

But the circle is larger than the minister’s formulation suggests.

The issue is not only whether working with Chinese automakers can preserve employment and provide Canadians with more affordable, technologically advanced vehicles. It is whether Chinese participation in Canadian production would strengthen Canada’s ability to design and produce the technologies at the heart of the next automotive economy or leave the country assembling vehicles whose most valuable systems, intellectual property and supply chains remain controlled elsewhere.

Before negotiating with individual Chinese manufacturers, Ottawa needs to explain precisely what it is trying to achieve.

Joly has cited Magna’s collaboration with the Chinese automaker XPeng in Austria as a possible model. In September 2025, Magna announced that it would assemble two new XPeng electric-vehicle models at its contract-manufacturing operation in Graz, Austria. The arrangement adds production to Magna’s Austrian operations and supports XPeng’s strategy of localizing manufacturing for the European market.

But it is not a joint venture of the kind Joly is proposing for Canada. Based on what the companies have publicly disclosed, the arrangement is centred on assembly: Magna provides manufacturing capacity and production expertise, while the vehicles remain XPeng-branded and based on XPeng platforms. The public announcement does not identify any transfer to Magna of XPeng’s core software, battery technology or intellectual property.

The distinction matters. Contract manufacturing can sustain employment, add production to an existing facility and give a Canadian company a valuable role in a Chinese automaker’s international expansion. But those benefits are different from acquiring control over the technologies and capabilities that will shape the future of the industry.

If Canada’s immediate objective is to maintain assembly work and use existing plant capacity, this type of arrangement may contribute to it. If the larger goal is to strengthen Canada’s position in next-generation automotive technology, local production would need to include clear commitments on research and development, engineering, intellectual property, supplier integration and access to critical technologies.

Under Joly’s ownership condition, a company could be majority Canadian-owned on paper while remaining technologically dependent on its Chinese partner. The Chinese company could still control the vehicle platform, battery architecture, source code, software updates, engineering specifications, brand and other high-value inputs. If the partnership ended, the Canadian side might own a factory but lack the rights and knowledge needed to continue producing the vehicle.

Ottawa must therefore define Canadian control more rigorously. Where would the intellectual property reside? Could the Canadian partner modify or export the technology? Would it have independent access to suppliers? Could production continue if the Chinese company withdrew? Would Canadian security authorities have access to source code and software systems? Without clear answers, “majority Canadian-owned” risks becoming a corporate structure rather than a guarantee that Canada will acquire meaningful industrial capabilities.

The same concern applies to the labour protection requirement. Forced-labour risks have been identified in Chinese automotive supply chains, including in the production of aluminum and other raw materials and components used in vehicles and batteries. Compliance with Canadian labour laws at a plant in Canada would not, on its own, address forced-labour exposure farther upstream.

Diversification should expand Canada’s options and reduce its exposure to any single market. It should not come at the cost of weakening the partnerships and market access on which the existing automotive industry depends.

Potential Chinese partners should be required to disclose their suppliers, trace critical inputs and demonstrate that goods entering Canadian production are not linked to forced labour. Canadian workers should not be asked to compete with supply chains built on standards that would be illegal here.

The software condition is even more consequential. Modern electric vehicles are equipped with cameras, microphones, location tracking, communications systems and continuously updated software. The security risk is not limited to whether a company promises to store Canadian drivers’ personal information in Canada.

Ottawa must determine who writes the code, who can update it remotely, where diagnostic and location information flows, and which telecommunications modules are installed. These are not only questions of personal privacy. Connected vehicles also raise national-security and critical-infrastructure concerns.

The United States has already established restrictions on certain connected-vehicle software and hardware with links to China. Canadian rules will therefore have to be compatible with those of the United States, or vehicles assembled here may be effectively barred from the market on which the Canadian automotive industry depends.

That brings the commercial question into sharp focus. More than 90 per cent of Canadian-made vehicles are currently exported to the United States. Access to the integrated North American market has long been central to the economic case for locating automotive production in Canada.

A Chinese-backed plant could not assume the same degree of access to the United States. If its vehicles, software or critical components were excluded from the American market, the operation would have to rely on Canadian demand or exports to third countries.

Ottawa therefore needs to explain what commercial model it has in mind: production primarily for Canadian consumers, exports to Europe and other markets, or some eventual pathway into the United States?

That question also bears directly on Canada’s relationships with its existing automotive partners. The sequencing of Joly’s trip is instructive in this regard. After China, she will travel to Japan to meet Honda and Toyota, which together accounted for 77 per cent of vehicles assembled in Canada in 2025.

Japanese automakers have built substantial Canadian assembly operations around access to the integrated North American market, while Korean firms have become important investors in the battery and critical minerals supply chains supporting that system. Japanese officials have made clear that continued investment in Canada depends heavily on stable access to the United States.

Ottawa must therefore assess not only what a Chinese plant could add, but how it might affect the industrial ecosystem Canada has already built. Could integration with Chinese platforms discourage future Japanese or Korean investment? Would allied firms become more reluctant to locate sensitive technologies in Canada? Could Chinese automotive production complicate Canada’s position in the CUSMA review without providing a credible alternative export market?

Diversification should expand Canada’s options and reduce its exposure to any single market. It should not come at the cost of weakening the partnerships and market access on which the existing automotive industry depends.

This is not an argument for excluding all Chinese participation from Canada’s automotive sector. Chinese firms have made significant advances in EV affordability, battery technology and manufacturing, and carefully structured cooperation could create opportunities for Canadian workers, suppliers and consumers.

But any such cooperation must serve a clearly defined Canadian industrial purpose. Before approving individual deals, Ottawa should publish an economic-security framework for Chinese automotive investment and partnerships.

It should define what constitutes meaningful Canadian control; set enforceable requirements for local content, research and development, technology access and integration of Canadian suppliers; establish supply-chain and labour due-diligence obligations; and align connected-vehicle rules with those of the United States.

The framework should also allow Canada to revisit approvals, incentives or market-access arrangements if firms fail to meet their commitments, security risks change, or Beijing again uses economic coercion against Canada.

Just as important, Ottawa must explain how Chinese participation would fit with Canada’s relationships with the United States, Japan, South Korea and Europe, and with the billions already committed to building a North American and allied battery and critical minerals supply chain.

Joly’s four conditions are a useful starting point. But the decision before Canada is not simply who will assemble the next generation of vehicles. It is whether any new partnerships will strengthen Canadian technological and industrial capacity, preserve access to critical markets and reduce vulnerability or create new dependencies that will be difficult to unwind.

Before any deal is signed, Canadians need to know what Ottawa is trying to build, how a Chinese partnership would advance that objective and what safeguards would protect Canada’s longer-term interests.

Policy Contributing Writer Vina Nadjibulla is Vice President of Research & Strategy at the Asia Pacific Foundation of Canada.