There’s good news for international carmakers as the Chinese government recently announced that they have scrapped protectionist rules that don’t allow foreign automakers to set up businesses in China. With this change, the People’s Republic will be opening up its auto market in 2020.
Right now, part of the regulations are that to avoid hefty taxes to sell cars in China, foreign carmakers have to start open ventures with local firms and they must not own more than 50 percent of the Chinese counterpart.
These measures were actually introduced back in 1994. The Chinese government sought to promote Chinese companies, but at the same time, limit the influence of the already successful Western firms, which saw that the Chinese market has a huge potential for them.
Because China currently has very poor air quality, and the government wants to rapidly control this, they are lifting the restrictions for companies selling electric vehicles in China. This is also intended to encourage the market to buy more environment-friendly vehicles.
Companies like Tesla will be happy to hear this development. In fact, the said company has been looking for an opportunity to set up a new factory in Shanghai. Aside from Tesla, Nissan also mentioned that it wants to establish itself as a leading provider of electric cars in China.
Because of how well the current joint venture programs have been doing, there likely won’t be a rush for automakers to take advantage of the new regulations right away. It should also be mentioned that China’s announcement comes as a surprise because the trade war between them and the United States has been intensifying.
Because of the size of the auto market in China, multiple companies have entered deals with Chinese companies to operate in the country.
For example, Guangzhou Automobile industry group, the sixth largest car maker in China, has partnered with Toyota, Honda and Fiat.
SAIC, currently the largest car manufacturer in the world with estimated sales of 300,000 cars in Q1 2018, has a tie-up with brands like Volkswagen and General Motors. They also own MG and Roewe. Meanwhile, BYD, which was recognized as the largest EV manufacturer in the world in 2016, works with Daimler. Changan, one of the “Big Four” in the country, works with Ford, DS, Mazda and Suzuki. Zhejiang Geely Holding Group, also known as the 13th biggest carmaker in the world with sales of over three million cars yearly, partly owns Volvo, Lotus, Proton, Polestar, and 9.7% of Daimler. At the same time, they are currently allied with Honda, Kia, Peugeot, Citroen, Nissan and Renault. BAIC Group, which owns the rights to the old Saab 9-3 and 9-5 platforms, is currently working with Hyundai and Mercedes. Furthermore, Brilliance Auto, which sold cars in Europe back in 2007, has entered a deal with BMW and Toyota.