China lowers barrier for foreign brands to build cars

From January 1, 2022, building cars in China will become both easier and more profitable for foreign auto-makers.

Announced by the Chinese Ministry of Commerce and the National Development and Reform Commission, there will longer be a requirement for global auto giants such as Ford or General Motors to establish a 50:50 joint-venture with a local brand in order to build and sell cars in China.

This ceases a practice that dates back to 1994.

In 2018, Chinese officials did increase the maximum ownership for foreign businesses to 70 per cent, which was just enough to entice BMW to bed Brilliance as a joint-venture partner.

But the scrapping of the joint-venture regulation in its entirety is thought to be a move to tempt new start-ups like Rivian and Lucid to enter China and move production to the world's biggest car market.

Legacy car-makers like Volkswagen and Mercedes-Benz, meanwhile, are all expected to take over their existing joint-venture operations by buying their local partner out of their agreement.

Originally, JVs were introduced to keep more profits in the country and help grow domestic Chinese brands.

It also helped the Chinese government as the five biggest car-makers – SAIC, FAW, Dongfeng and Changan – are all state owned.

Daimler is set to be the first to benefit from the new rules by reducing its joint-venture share with BYD to around 10 per cent, with its Chinese partner owning the remaining 90 per cent.