China has long held onto a pretty strict limit for foreign ownership of automotive ventures within its borders, but that wall is about to be torn down.
China will lift the cap on foreign ownership of domestic auto ventures by 2022, Reuters reports. This is huge, considering China has limited foreign automakers to 50 percent ownership of domestic ventures since 1994.
Lifting joint-venture ownership caps doesn’t change anything for automakers who import all their products and pay tariffs out the wazoo as a result.
The caps will be lifted in stages. Foreign ownership caps for electric and plug-in hybrids will be lifted in 2018, followed by commercial vehicles in 2020, and the rest of the auto sector will follow suit by 2022.
These limitations were introduced in order to help develop China’s homegrown automakers. By forcing foreign interests to partner up with domestic car companies, China’s OEMs could get more experience in the craft while the foreign automaker reaped the benefits of expanding into a new market.
Many automakers have already established joint ventures in China, and according to Reuters, that may not change even when the caps lift. Automakers including GM, BMW and Daimler praised their current partners and didn’t immediately make plans to split off if possible. This could be big news for Tesla, which has wanted to plant some roots in China for some time but hasn’t yet. Late last year, Ford announced a $756 million deal to build EVs in China with the help of Zotye Auto.
It’s been an up-and-down week for Chinese and US trade relations. While this news is certain to warm things up, earlier this week the US Commerce Department banned US companies from selling smartphone components to Chinese manufacturer ZTE amid allegations that it lied about reprimanding employees who helped illegally ship US equipment to Iran and North Korea.