China to ease foreign automaker rules—with preference for electric cars

50% domestic ownership rules won’t apply to electric car makers by the end of this year.

Megan Geuss – Apr 18, 2018 1:42 pm | 51

Electric car charging point, Shanghai Pudong. Credit: Getty Images

This week China announced plans to ease restrictions on automakers importing cars into the country, with electric vehicle makers being the first to benefit from the change.

Currently, foreign automakers that want to sell their cars in China must either face a 25-percent import tariff or must build a factory in China with a 50-percent ownership cap—a domestic firm must own the other 50 percent. Tesla has been the most vocal in its opposition to China’s restrictions, and it could stand to gain the most from the changes off the bat. Tesla doesn’t yet have a manufacturing presence in China, and the country has said that it will relax its factory ownership restrictions on electric vehicle manufacturing within the year.

According to the South China Morning Post, the 50-percent factory ownership restriction will be relaxed in 2020 for non-electric commercial vehicle manufacturers and in 2022 for non-electric passenger vehicle manufacturers.

The Wall Street Journal suggests the move could be an effort to defuse trade tensions with the US. But the Journal also spoke to sources who said the move may not change much for entrenched US companies that have already committed to China’s rules about joint ownership with state-owned companies. GM is just one example, with a 14-percent market share in China and 10 joint ventures with domestic Chinese companies.

Still, the move could be a boon for GM, maker of the electric Bolt, as well as for Tesla and other companies currently sinking significant resources into developing next-generation electric cars, like Volkswagen. China is a massive market for an automaker to gain access to, and the country has a timetable for manufacturers to increase electric vehicle sales. The country even apparently has a timetable for completely banning gas and diesel vehicles, according to comments made last summer by China’s vice minister of industry and information technology, Xin Guobin.

Even without a gas and diesel ban, China leapfrogged the US in electric vehicle adoption in 2016. Forty percent of the electric vehicles sold in the world in 2016 were sold in China, and that’s not including 200 million electric two-wheelers, 3 million to 4 million low-speed electric vehicles, and more than 300,000 electric buses. There’s clearly an appetite for electric transportation in the country, helped along by state rules to encourage EV adoption.

For years, Tesla has been trying to find a way into China without having to give up 50 percent of its factory ownership to another company, and late last year, rumors suggested that the company had made a deal to open a factory in Shanghai’s free trade zone. Still, the company apparently insisted on maintaining full ownership of the factory, which meant it would have paid a 25-percent tariff on “imports” of the car before this week’s changes were announced.

Additionally, just a few months ago, Volkswagen announced that it would significantly expand its presence in China with the launch of 15 new battery-electric and plug-in hybrid electric vehicles.