The Chinese government announced on April 17 that it would remove the foreign share ratio of passenger cars in 2022. By 2022, all foreign equity ratio restrictions in the auto industry such as pure electric vehicles (EVs) and commercial vehicles will be eliminated. "Nihon Keizai Shimbun" reported on April 18th that China's trade friction with the United States has highlighted the open market stance. In the world’s largest auto market, the degree of freedom of foreign-owned car companies’ operating strategies will increase.
As the Chinese government stated on April 10th at the Boao Forum for Asia that it will significantly relax the restrictions on foreign investment in the automobile and other industries, the National Development and Reform Commission has announced a timetable for the relaxation of foreign equity ratio restrictions for all types of vehicles. Prior to this, the upper limit of the proportion of foreign car companies in China was 50%.
The specific time for cancelling the ratio of foreign-invested shares is that the ratio of foreign-invested shares of special vehicles and new energy vehicles will be removed in 2018; the ratio of foreign-invested shares of commercial vehicles will be removed in 2020; and the foreign-invested-to-equity ratio of passenger cars will be lifted in 2022. Through the 5-year transition period, the auto industry will cancel all restrictions. The Chinese government proposed in April 2017 the "Mid-term and Long-term Development Plan for the Automotive Industry" to propose to relax restrictions on foreign investment by 2025. This time not only to advance the time to 2022, but also to change the relaxation restrictions to cancel restrictions.
Tesla, an American electric vehicle company, has been facing obstacles in setting up factories in China around half of its capital contribution. The Chinese New Deal seems to be targeting this issue. At the same time, in 2022, the restrictions on the number of joint ventures of foreign car companies in China will be no more than two.
Under the new policy, with the inclusion of Japanese car companies, the freedom of foreign companies to operate in the Chinese market will increase.
An executive from a large foreign-invested automobile company stated that "if there is no cooperation from China, it will have an adverse impact on China's business, and it is necessary to carefully consider the need to increase the ratio of capital contributions." Around the restrictions on specific relaxation, there are also comments that "If you do not look at the details announced in the future, it is not clear."
In areas other than automobiles, the shipbuilding industry will remove restrictions on foreign-invested shares in 2018, including design, manufacturing, and repairs. The aircraft manufacturing industry will remove the restrictions on foreign-invested shares in 2018, including mainline aircraft, regional aircraft, general aircraft, helicopters, drones, and aerostats.
In addition to the announced measures for opening up in the financial and automotive industries, a series of opening measures will also be launched in areas of high concern for energy, resources, infrastructure, transportation, commercial circulation, and professional services.
In 2017, the sales of new cars in China reached 28.87 million. It is 1.7 times that of the United States and 5.5 times that of Japan. With passenger vehicles as the center, brand sales of Volkswagen, GM, Nissan, Honda, and Toyota jointly ranked among the top.
As the Chinese government relaxes restrictions on foreign investment, the competition between domestic auto makers and foreign auto makers will become increasingly fierce. Some have pointed out that the auto industry will undergo restructuring.
China is in an era of full competition for local brands and foreign investment. In the Deng Xiaoping era, China introduced foreign investment, expanded its automobile production through joint venture production of automobiles. However, in China, the world's largest auto market, almost all foreign brands are popular.
"This is good news. All large cars must adjust their strategies," said Nissan Carlos Ghosn, president of Nissan Motor Co., on television on April 17.
An executive from a Japanese car company stated that "it is an important decision whether to increase the proportion of funding." If the proportion of investment in China's joint ventures is increased, the right to control the joint venture will increase, and it may also push up the combined performance. Therefore, many people believe that most overseas large car companies will increase their investment ratio.
The Chinese government has also begun to take measures to cope with the era of full competition between local manufacturers and foreign car companies. The first car group, Dongfeng Motor Group, and Changan Automobile Group, which form joint ventures with foreign car companies, will perform coaching and support three companies to jointly promote technological development. Some people think that in the future, they will consider promoting the integration of three companies.
In addition, there has also been an increase in the number of overseas car companies that Chinese companies have failed to buy and sell. With the support of the government, Zhejiang Geely Holdings, a private company, successfully acquired Volvo Cars and continued to maintain rapid growth. Geely also invested in German Daimler, actively promoting its overseas strategy.
Analysts with foreign-invested survey companies stated that “In addition to the domestic alliances, Chinese manufacturers eager to increase their competitiveness will also initiate acquisitions of overseas automakers. Starting with Chinese companies, the global auto industry may promote restructuringâ€.
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