Foreign automakers to get full ownership in China

KUALA LUMPUR: Yes, that’s true. China, the world’s largest automotive market will soon end its 28-year old policy. Thus, allowing foreign automakers full operational rights without the involvement of a local partner. The new policy will hit the market from 1st January, 2022.

It was only after previewing the intention almost a year back, the Chinese Ministry of Commerce and National Development and Reform Commission announced the directive.

Under the previous policy, an initiative for a 50:50 joint venture was laid down by the Chinese government, all to encourage information and technology know-how transfer to local automakers and bring profits back to the country.

The latest move by the Chinese government comes in the light of the overpopulation of local EV brands and the urgent need to ‘keep things under control’ that will happen via consolidation.

However, the signs of the Chinese government giving foreign automakers some relief on the joint-venture front were seen in 2018, wherein Tesla made an investment in its fully owned Giga factory in Shanghai and announced an increase of ownership to 70 percent. The China-based Gigafactory is now the automaker’s largest plant and main export hub.

Adding to the list is Volvo Cars that recently announced its intention to fully control its operation in China after acquiring shares of the companies it formed a joint venture with earlier.

Experts at Forbes also pointed out that the new directive will allow new car manufacturers to enter the world’s largest EV market with less financial resources.

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