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China Removes Foreign Ownership Caps For Automakers

China announced on Tuesday that it would eliminate foreign ownership limitations for companies making cars, marking a colossal shift in policy for the world’s largest auto market.

In 1994, China imposed ownership limits on foreign carmakers, restricting them to owning no more than 50 percent of any local auto-making venture. This forced foreign carmakers to partner up with local Chinese companies. The move was originally intended to help Chinese domestic carmarkers, which at the time were nascent, compete and learn from well-established players.

Today, China is the world’s largest car market by volume, and local firms have deep-rooted joint ventures and partnerships with global firms. In the case of General Motors, the automaker has 10 joint ventures and two wholly-owned foreign enterprises that span nearly 60,000 employees in China. Shanghai-GM – GM’s primary joint venture in China with SAIC – is responsible for the production, sales operations, distribution and aftersales activities of the Buick, Cadillac and Chevrolet brands in the country.

Buick Velite 6 EV

The Buick Velite 6 is a new-energy vehicle introduced for the Chinese market

China’s removal of the ownership caps will begin in 2018 for firms making alternative energy vehicles such as electric and plug-in hybrid cars. It will then be expanded to makers of commercial vehicles in 2020 and to the broader car market by 2022.

The change in policy marks a new twist for a tumultuous week for Chinese trade that was kicked off on Monday by the U.S. banning American firms from selling parts to Chinese phone maker ZTE Corp. China retorted by instituting a temporary fee on U.S. sorghum.

Meanwhile, General Motors – as if by coincidence or by careful planning – announced a completely new-energy vehicle for the Chinese market on Tuesday: the Buick Velite 6 Plug-In Hybrid. Additionally, Buick – which enjoys significant popularity in China and is among the market’s best-selling automotive brands – revealed the Buick Enspire concept – a pure-electric vehicle that foreshadows the brand’s direction in terms of powertrain and design.

2018 Buick Enspire Concept exterior 001

In addition to scrapping the limits on foreign automotive ownership, China is also removing similar limits on foreign ownership in the shipbuilding and aircraft industries in 2018.

GM Authority Executive Editor with a passion for business strategy and fast cars.

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Comments

  1. Good work POTUS Trump. MAGA!

    Reply
  2. Can you say Tesla coming to a Dealership near you in China.

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    1. They’re already doing a factory in China… now it’s just about how they will structure their business – with a “partner” or without.

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    2. No you can’t because Tesla doesn’t sell their vehicles to franchised dealers to sell to the general public. They open up their own stores and sell direct.

      Reply
  3. i bet the chinese are aiming to export chinese branded vehicles into the US by the early 2020s. so removing the restriction removes a possible point of contention.

    design/quality probably won’t be competitive but they’ll be cheaper and have stronger warranties than the competition. that is the same playbook the koreans/japanese used when they entered the US market.

    but i think the wild card is EVs. EVs represent an opportunity for the Chinese leapfrog the ICE and get right into the game since the field is more or less wide open for the next few years. i wouldn’t buy a chinese car but for the right price, i’d bet there are a lot of people willing to give them a try.

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  4. Great news for Buick. Going to change the landscape of GM products and profits. Like we imported low volume cars for Australia, we could get the same from China. Hopefully we see an Avista, even if it’s an EV (take on Model S) or a performance hybrid.

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  5. Even if many here are against Chinese vehicles and products, I can testify that the SAIC manufactured 3.4 L V6 engine of my 2009 Chevy Equinox has not had ANY problems in nine years. So I can trust GM products manufactured and assembled in China.

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  6. Does that mean China still keeps 1/2 of the money on each car or truck made in china?

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  7. This is just in time to open the doors wide open for a full on Chinese assault of the American, European, South American and African markets.

    Now that we have teached them, they’re coming for your job with a massive Chinese steamroller.

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  8. As if they had read my mind — I thought already that in times when Chinese companies are expanding worldwide, in the automobile spearheaded by Geely, and in robots Heier, that it was time to remove the protective measures which allowed a Chinese automobile industry in the first place.

    The Chinese know that protectionism can help to grow a young industry and county, just as the US industry fought the Civil War to be able to impose protective tarrifs for their incipient industry .

    Trying to protect a declining industry and power by protective measuers as POTUS Trump is claiming to try, is bound to failure.

    While the recent aggressive moves by Trump may have played a role in taking the decistion now, it is a logical step which was certainly pondered long ago. It comes at the right moment for China.

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  9. Interesting analysis in europe.automotivenews.com by Yang Jian from Crain’s Chinese sister publication on
    “Why it won’t be easy for global automakers to part with Chinese partners”

    Yang Jian discusses various foreign automakers, and ends with GM:

    »

    Compared with other global automakers, General Motors may find it the most costly to free itself from Chinese partners. GM operates two joint ventures in China: SAIC-General Motors, a 50-50 venture with SAIC; and SAIC-GM-Wuling Automobile, a 50.1-44.0-5.9 partnership among SAIC, GM and Guangxi Automobile Group Co., a state-owned company in southwest China’s Guangxi region.

    SAIC-GM produces Buick, Chevrolet and Cadillac models while Wuling makes mini-buses under the Wuling brand and entry-level passenger vehicles under the Baojun marque.

    In 2017, GM delivered 4.04 million vehicles in China, of which 53 percent were generated by Wuling and Baojun brands. Moreover, SAIC-GM-Wuling started selling a micro electric car late last year.

    A breakup with SAIC would likely force GM to lose Wuling, a company majority owned by SAIC. That would cost GM more than half of its China sales and the benefit of accumulating carbon credits.

    And it’s the last thing GM wants to do in China, its largest market worldwide.

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