China will ease limits on foreign stake in JVs

Workers assemble cars at a Beijing joint venture between Beijing Automotive Industry Holding Co. and Hyundai Motor Co. Chinese government officials are signaling they plan to lift restrictions on foreign ownership stakes in automotive joint ventures, a move that will threaten some domestic brands.

Photo credit: BLOOMBERG
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China's Ministry of Industry and Information Technology wants to loosen ownership restrictions on foreign automakers' joint ventures despite strong opposition from state-owned auto companies.

Under existing policy, foreign automakers must form partnerships with local companies to produce vehicles in China. Foreign shareholders are barred from owning more than 50 percent of these joint ventures.

At a press conference this week in Beijing, ministry spokesman Xiao Chunquan said the organization will join other ministries to figure out how to implement the changes.

Xiao did not indicate when the ministry might loosen its restrictions.

The China Association of Automobile Manufacturers, whose key members are state-owned auto companies, voiced strong opposition to any relaxation of the limits.

"Relaxing the current foreign ownership restrictions will wipe out Chinese brands," the association said in a statement. "Foreign companies can totally use the competitive advantage of their global supply chains to support a price strategy to kill Chinese brands in the cradle."

China is the world's largest new light-vehicle market and continues to attract billions of dollars in manufacturing and r&d investment from domestic and global automakers.

In 2013, Volkswagen AG surpassed General Motors as the largest foreign automaker in China.

In January, Chinese brands extended recent market-share losses. Their combined share fell 4.9 percentage points from a year earlier, to 38.4 percent, while GM, Volkswagen and other foreign automakers gained ground amid higher industry sales.

The Ministry of Industry, which regulates the auto industry and other industrial sectors in China, is taking action after the communist party's decision in November to open the nation's economy further.

China President Xi Jinping, who took office in 2012, has pledged to deregulate government control of the domestic economy and to open industrial sectors to private and foreign investors.

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