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China Ending Ownership Caps on Foreign Automakers

China Ending Ownership Caps on Foreign Automakers

China has announced it will end ownership caps on foreign automakers in 2022. As part of the changes, restrictions on new-energy vehicle ventures will also be removed this year. This major shift in policy will open new doors for global automakers in the world’s largest car market.

Companies building battery-electric or plug-in hybrid vehicles will have ownership restrictions removed this year. The biggest benefactor of this change will likely be electric carmaker Tesla, who has avoided the Chinese market primarily because of the former rule that they could only own 50 percent of their Chinese operation, requiring a joint-venture with a local automaker.

Commercial vehicle makers will see their restrictions removed in 2020, while traditional passenger carmakers will see ownership restrictions removed entirely in 2022.

Implemented in 1994, the local ownership rule was put in place by Beijing to prop up its domestic automakers. Many traditional automakers such as General Motors and Honda have found great value in their joint-venture partners in China and have signaled the rule change may not alter their strategy in the country much.

Some automakers have become dependent on their Chinese partners for added production capacity and engineering assets.

The primary benefit of lifting the ownership restrictions will come in the form of foreign automakers having a larger share of their profits from the Chinese market. Each traditional automaker will have to decide if a larger stake will offset the benefits currently provided to them by their joint-venture.

Likewise, today’s announcement in China also makes it far more probable that Tesla will end up in the Chinese market.





 

About Nick Saporito

AutoVerdict Senior Editor Nick Saporito began writing about cars at age 13. Nick ran a couple of automotive enthusiast sites for several years, before taking some time off to focus on his career and education. By day he's a marketing executive in the telecom world and by night he hangs out here at AV. You'll find him focusing on tech, design and the industry's future.
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  1. Tone
    Quite interesting if it proves to have substance. China has promised all kind of reforms in the past, but I suspect it's different this time for a couple of reasons. The rising tide of protectionism may strike at the heart of their near-term economic plans, for one. Some concrete measures to address the concerns of the Trump administration and the EU could deflate the concerns that gave rise to protectionism and not only ensure access to export markets for China, but also help make the case for free-trade deals as part of their Belt and Road initiative. The other part I suspect China will want if it 'plays nice' in its domestic market is greater access for foreign direct investment elsewhere -- where they've seen a fair bit of limits based on concerns about Chinese (meaning, Chinese government) ownership in key industries in other countries.
    Andrew_L
    I wonder if this means some companies will sell their Chinese owned companies after 2022
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