China approves of total foreign ownership in its automotive sector

The Chinese administration has declared that it will allow complete foreign ownership across the automotive sector within the next five years to encourage electric vehicle production across the country. The change in the government policy is likely to lead to the scrapping of earlier legislations, enabling vehicle manufacturers to work and share technology with state-owned automakers.

According to the Cabinet’s planning agency, the restrictions on the foreign proprietorship of the electric car manufacturers will be repealed from this year. In a move to further boost the China automotive industry, the government will annul the foreign ownership limits that it had set earlier for commercial automobiles and passenger vehicles by 2020 & 2022 respectively.

The National Development and Reform Commission of China has stated that after the five-year transition span, all the restrictions pertaining to foreign ownership will be removed. Till date, the Chinese government had restricted the ownership of automotive giants such as General Motors and Volkswagen AG to less than 50% in the Chinese firms. It had further restricted the number of joint ventures between foreign automakers and its Chinese counterparts to two.

Being the largest automotive market across the globe, reputed automakers seem to have complied with the Chinese laws to capture a huge chunk of the country’s revenue through this sector. Sales of sedans, minivans, and SUVs tallied up to nearly 24.8 million units in 2017, with the U.S., Japanese, Korean, and European brands leading the sale.

Reportedly, estimates claim that China is the dominant force across the global electric vehicle market, with last year’s sales increasing by 53% as compared to 2016. The country is using sales targets and fuel efficiency regulations to garner the support of automobile giants for regional dealers building battery technology.  The country houses one of the biggest electric car manufacturers including Geely, BYD Auto, and Dongfeng Motor Group.

As per experts, this strategic move will increase the procurement of new vehicle technologies in the country, thereby benefitting the local automotive manufacturers in the long run.