China announces timeline to open automobile industry to foreign ownership

China drops rules that exclude foreign carmakers

China announces timeline to open automobile industry to foreign ownership

The highly symbolic moves in autos come after President Xi Jinping said last week China would scrap ownership limits "as soon as possible", exciting global auto brands even as Beijing and Washington spar over trade tariffs. Forcing foreign carmakers to work in a 50/50 partnership with Chinese firms was created to help domestic automakers compete.

China will let foreign automakers from Volkswagen AG to Ford Motor Co. own more than 50% of local ventures, removing a two-decade restriction and giving a boost to global companies seeking to capture a greater share of the world's largest auto market.

China now restricts foreign auto firms to a maximum 50 percent ownership of joint ventures with local companies. Regarding Tesla, it's been reported that Elon Musk had been unable to secure a deal to open up an assembly plant in China.

However, Tesla and Shanghai officials have disagreed about the ownership of the proposed electric vehicle factory.

Those losing out include local new-energy vehicle makers such as BAIC Motor Corp. and BYD Co., with BYD in particular set to face tougher competition from any lower-priced Teslas, said Dan Zhuang, an analyst at Rhb Osk Securities Hong Kong Ltd.

Foreign vehicle brands, meanwhile, now have years of experience from operating in China and believe they can go solo without a local partner guiding them, the analyst said. "BMW will continue pursuing mutual benefit and win-win solutions with the local partners".

China has announced proposals to remove its limit on foreign ownership of automotive ventures by 2022, reports Reuters.

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Last month, Tesla chief Elon Musk said China's tough auto rules for foreign firms created an uneven playing field as scores of local and worldwide companies compete for a slice of China's fast-growing market for green cars.

The looser rules are likely to raise pressure on domestic carmakers, potentially hitting the likes of Warren Buffett-backed BYD Co. This is huge, considering China has limited foreign automakers to 50 percent ownership of domestic ventures since 1994.

Chinese automakers may already be comfortable with the current structure.

"While getting a bigger share could be advantageous in terms of boosting profits, they may actually be already too dependent on their Chinese partners to sever those ties".

The liberalisation meets a longtime demand of the United States and other countries seeking better access for their companies in the world's biggest auto market and one of the largest markets for air travel. VW said something similar, claiming that its existing joint ventures won't be affected, a sentiment mirrored by GM.

Geely has bought a almost 10 percent stake in Daimler, becoming the German automaker's biggest shareholder and gaining leverage to push for technology sharing.

Other automakers are encouraged by the news.

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