The world’s largest automotive market will end a 28-year-old policy, allowing foreign automakers to have full control of their operations without the need for a local partner from January 1st 2022.
The Chinese Ministry of Commerce and the country’s National Development and Reform Commission formally announced the directive two days ago, after previewing the intention 12 months earlier.
Back in 1994, the initiative for 50:50 joint-venture was laid down to encourage technology and information transfer to local car manufacturers plus profits back to the country. Fast forward to 2021, it seems that with the more modular construction of electric vehicles (EV), the country is now overpopulated with local EV brands with the government suggesting consolidation to ‘keep things under control’.
In 2018, signs of loosening were seen via Tesla’s investment of its wholly owned Giga Shanghai factory plus the announcement of an increase in ownership of up to 70%. The first Chinese-made Tesla Model 3 was ready for delivery exactly two years ago and the ‘Gigafactory’ is now earmarked to be the largest Tesla plant and main export hub.
Recently, Volvo Cars became the first major foreign automaker to announced its intention of full control over its Chinese operations after acquiring shares of companies it formed during the joint venture establishments. Stated-owned JV companies include SAIC (Volkswagen), FAW (Toyota, Volkswagen), BAIC (Mercedes-Benz), Dongfeng (Nissan, Honda) and Changan (Mazda, Ford).
As noted by Forbes, the new directive will make new car manufactures such as Rivian and Lucid entering the largest EV market with less financial resources. The Chinese government however still maintain the limitation of foreign ownership in industries such as tobacco products rare-earth minerals and film production and distribution.