TOKYO, Dec. 28, 2021—China no longer hides its claws in dominating the world with its industrial and consume products. On Monday, Dec. 27, 2021, the Chinese Ministry of Commerce and the National Development and Reform Commission announced Beijing will be lifting investment restrictions on foreign automakers in their Chinese joint ventures, effective Jan. 1, 2022, according to Japan’s Nikkei newspaper English language website (https://asia.nikkei.com/Business/Automobiles/China-scraps-foreign-investment-curbs-in-auto-sector) Dec. 28.
While the dereg is part of the April 2018 decision to open up the Chinese auto market in phases, t’s a demonstration of confidence in Chinese automotive battery technology. Tesla is currently installing Chinese-made lithium iron phosphate (LFP) on its standard-range models. European automakers also are believed to be following the lead, in addition to lithium-ion batteries. U.S. and European battery makers as well as automakers rely Chinese suppliers for automotive batteries. China accounts for 95 percent of global LFP batteries and substantial portions of minerals including cobalt and nickel used for LFP batteries. Chinese EV buses account for more than 90 percent of global bus fleets.
Traditional foreign automakers that currently hold 50 percent stake in Chinese automakers under the current regulation can buy out what their Chinese counterparts own but they have to rely on CATL, BYD and other Chinese battery makers for core vehicle energy sources.
Nikkei Dec. 28, 2021 report:
BEIJING — The Chinese government has abolished limits on foreign automakers’ investments in the passenger vehicle sector, effective next year, sweeping away the last major restriction on global players.
Passenger vehicles will on Jan. 1 come off the so-called negative list restricting investment by foreign corporations, according to Monday’s announcement by the Ministry of Commerce and the National Development and Reform Commission. Local media characterize the step as China further opening up to the world.
The move makes good on an April 2018 announcement that China would open up its automotive sector in phases. New-energy vehicles, such as electric vehicles, received the treatment that year, followed by commercial vehicles in 2020. The remaining segment, passenger vehicles, accounts for 80% or so of the auto market.
A foreign automaker can currently operate in China only through a joint venture in which its stake is capped at 50%. It can establish up to two such ventures, though this limit does not apply in new-energy vehicles.
Many outside China had called for the government to swiftly open up the world’s largest auto market.
After the investment restrictions on EVs were lifted, Tesla set up a wholly owned Chinese subsidiary that began to build EVs in 2019. Volkswagen raised its 50% stake in an EV joint venture to 75% in 2020.
Now, BMW is expected to raise its ownership in a 50-50 joint venture in Liaoning Province. It had long planned to level up to a 75% stake in the unit in 2022.
Japanese automakers Toyota Motor, Honda Motor and Nissan Motor also have 50-50 joint ventures in China. Although removing the investment cap promises more managerial freedom, many in the Japanese camp are hesitant.
“Considering the importance we place on having trusting relationships with our Chinese partners, we will think carefully about raising our investment ratio,” an executive at a major Japanese player said.
###
Insight Into the Future