China has finally brought the walls down on the strict foreign investment limits that defined the … [+]
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China has chosen the western world’s quietest business period to throw an eastern cat amongst its pigeons, by lifting its foreign-ownership limits on automotive companies from January 1, 2022.
That will allow for full foreign ownership of passenger- and commercial-vehicle brands in China, rather than the existing system that has limited foreign ownership to joint ventures, freeing up investment in some of the biggest carmakers in the world.
It will also lift the restriction that foreign investors could only establish a maximum of two joint ventures in China.
The Chinese Ministry of Commerce and the country’s National Development and Reform Commission made the admission in a document released today, after previewing the announcement a year ago.
The Chinese Government maintains a list of industries in which foreigners must invest at a maximum rate of 50:50 joint-venture partners, rather than full owners, and the car industry has had a place on the list since 1994.
Tesla
TSLA
The announcement frees up newer brands like Rivian and Lucid to gain access to the world’s biggest passenger car market without buying in to a Chinese brand, and it also allows early-adopting foreign brands like Volkswagen, Ford, GM and Mercedes-Benz to take over their joint ventures.
It could even drive Chinese partners to withdrawn from their joint venture, with foreign partners taking more control, more technology and more profits with them.
Joint-venture schemes in China were designed to leave both profits and technology in the country to allow for domestic brands to grow and prosper, and that seems to have worked.
The five biggest automakers are all Chinese (obviously, because foreigners haven’t been allowed to own them), with SAIC, FAW, BAIC, Dongfeng and Shangan all state owned and all involved with joint-ventures with foreign brands.
Joint ventures from the Shanghai-based SAIC builds and sells Volkswagens, Ivecos, Skodas, Buicks and Chevrolets, but it also has its own brands like Maxus, Roewe, Yuejin and the once-British MG brand. It exports the MG brand back to Great Britain and it is even exported into Australia.
Dongfeng is based in Wuhan, and has JVs with Cummins, Dana, Honda, Nissan, Renault, Kia and Stellantis (it rescued France’s PSA Groupe a decade ago and maintains a significant holding in Stellantis).
FAW builds almost a dozen different brands, including Volkswagen, Mazda, Toyota, Audi and GM, along with owning Hongqi, Jilin, Jiaxing, Haima and other domestic brands.
Ford went with Chang’an for its joint venture, as did Suzuki, Mazda and Stellantis, while BAIC has joint ventures with Mercedes-Benz and Hyundai.
There are several other state-owned automakers in China, including Chery and Guangzhou Automotive Group, but China’s rising automotive stars are independent.
BYD has boomed this year, with investment from Warren Buffet, as have Great Wall, Nio and XPeng, though the biggest star of them all has probably been Geely.
It manufactures its Geely Auto brand, as well as Lynk&Co, and it has strategically taken over global brands like Lotus, Proton, Volvo and Polestar, while its founder has bought a 9.6% stake in Daimler, the parent company of Mercedes-Benz, and taken half of the smart citycar brand.
It’s not all good news for foreign investors, though, with China still keeping a tight rein on foreign investment in rare-earth minerals, tobacco products and film production and distribution.
