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In a surprising move, to say the least, China has decided to completely remove all previously required restrictions on foreign ownership of the auto industry. The decision, which will come into effect from 1 January 2022, was announced through a document released in recent days by the Chinese Ministry of Commerce and the National Commission for Development and Reforms. The decision is part of a new management of the automotive sector on the basis of the changed market conditions, but also of the new ambitions of the Chinese brands that are increasingly aiming at exports.
From the initial 50% up to 70% already decided in 2018
Since 1994, China had asked foreign car manufacturers, especially those in Europe most interested in entering the Chinese market, to form joint ventures with 50% shareholdings with Chinese companies to guarantee immediate access to the local market.
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In 2018 the rules had already been changed and foreign companies were allowed to increase their shares up to 70%, for example allowing BMW to do so for the joint venture signed with the Chinese partner Brilliance which led to the local production of the SUV. electric iXe.
China opens up to new producers
Now China will allow full foreign ownership of car brands in the People’s Republic, which should open the door to new brands, including Tesla rivals such as Rivian and Lucid that could enter the world’s number one automotive market without forming joint ventures with local companies. In turn, car manufacturers such as Ford, VW, Mercedes and others could at this point take over their existing joint ventures and decide how BMW has already done to expand the number of models produced in China as is the case with the 5 Series. then exported to the world.
The reasons behind the initial restrictions worked
The joint venture requests initially imposed by China had been formalized to ensure that not only profits, but also technology remained an integral part of the Chinese economy as well as to help national companies grow in terms of know-how above all. But now, with more and more Chinese manufacturers assembling independently and also selling vehicles abroad, the strategy (which has also worked) is no longer needed. The new move could even motivate local partners to withdraw from existing joint ventures with Western companies or to start new ones.