GM expects a minimal negative impact from China’s decision to end investment program for carmakers

Article by Anita Panait, on January 3, 2012

China has announced that it will end its seven-year program to encourage foreign investments in the auto industry. The move will include restoring tariffs on imported plant equipment and U.S.-made vehicles. It is expected to have a heavy impact on manufacturers that have operations in China, as future expansions may have to get through the eye of a needle before winning approval.

China, however, remains supportive of foreign investments in environmentally-friendly technologies and alternative-fuel cars.

General Motors Co., the largest carmaker in China, is focused on its Chinese operations.  “We expect the new guideline to have minimal negative impact on GM’s future plans in China,” GM said in a statement. The company added it expects to remain a “key pillar” of the Chinese automobile industry. Kevin Wale, GM’s China president, had revealed that the company will increase its production capacity by 25% to 40% over the next two years.

Volkswagen, meanwhile, said it is working on its expansion plans in China, which include “actively developing electric cars and new- energy vehicles, and will continue to bring in fuel-efficient technologies and products.”

China’s National Development and Reform Commission and Ministry of Commerce said the move was meant to allow for a “healthy development” of the country’s auto industry. Chinese carmakers are struggling, even in partnership with foreign companies. China currently has more than 70 automakers, with the bottom 55 credited for only 11% of sales, according to the China Association of Automobile Manufacturers. China’s new policy will take effect on January 30, 2012. [source: Bloomberg]

Topics: gm, china, investment

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