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China to remove ownership caps

China will remove foreign ownership caps on local auto companies by 2022 and restrictions on new-energy vehicle ventures this year, which will open the market wider to carmakers.
Posted on 17 April, 2018

The Chinese authorities said in a statement that in the next five years they would remove the rules that have required carmakers like General Motors (GM), Toyota and Volkswagen to link up with a local partner before building a factory in China. This not only applies to manufacturers of electric cars, but for companies that make jetliners, helicopters and drones. Beijing plans to move even faster, eliminating foreign ownership limits this year. Tesla would be the immediate big winner from the changes. The electric carmaker has already identified a site in Shanghai for a factory but has not wanted a partner for fear of losing control of its technology. Tesla chief Elon Musk said last month China's tough auto rules for foreign companies created an uneven playing field as scores of local and international companies compete for a slice of China's fast-growing market for EVs. However, some carmakers are hinting that they will remain with their local partners, and may even see more risks than opportunities in ditching the joint venture structure. An unnamed senior General Motors executive said to the New York Times last week that even without ownership caps the U.S. carmaker would not cut ties with local partner SAIC Motor Corp., adding GM would not be as successful in China on its own. On Tuesday GM indicated further that it was not eager to buy out its partners. “G.M.’s growth in China is a result of working with our trusted joint venture partners,” the statement said. “We will continue to work with our partners to provide high-quality products and services to consumers.” Honda Motor Co. said its China business had grown on the back of strong local tie-ups. "At the moment we have no plans to change our capital relationship," a Honda spokesman said to Automotive News. Volkswagen, however, had deliberately created a temporary joint venture with Anhui Jianghuai Automobile Group, which would allow them to "explore whether new opportunities were possible."