China weighs foreign EV makers in FTZ

BEIJINGChina is discussing a plan to allow foreign automakers to set up wholly owned electric-vehicle businesses in its free-trade zones (FTZ) in an ambitious push to promote non-emission cars, according to company officials briefed on the matter.

The plan, which is subject to change as a final decision hasn’t been made, could be put in place as early as next year, the people said, asking not to be identified as the deliberations are private. If the policy takes effect, it would be a major revision of a fundamental principle governing China’s auto industry policy dating back to the 1990s, which requires foreign automakers to set up joint ventures (JVs) with local counterparts.

China’s Ministry of Commerce, which is responsible for formulating policy governing foreign direct investments, said in an emailed response to Bloomberg News that it will “actively implement the opening up of the new-energy manufacturing sector to foreigners, together with other departments under the direction of the State Council”.

The ministry also referred to a notice issued in August by the State Council, or Cabinet, in which it directed government agencies to broaden foreign investor access to areas including new-energy vehicle manufacturing.

China has been gradually opening up access to foreign auto manufacturers in FTZ. Foreign companies were allowed to set up 100%-owned motorcycle and battery manufacturing operations in China since July 2016. The so-called 50-50 rule for Sino-foreign JVs was introduced in 1994 to ensure that China’s thenfledgling auto industry can benefit from technology transfer by jointly operating factories with global auto companies such as Volkswagen AG and General Motors Co.

Xu Shaoshi, then-chairman of the National Development and Reform Commission, said in June 2016 that the government is looking into lifting the 50% ownership cap. The policy has been criticised in recent years for shielding state-owned companies from competition and reducing the drive to build their own brands. Its supporters say the rule gives China’s automakers a chance to build enough scale and develop technology to withstand global competition.

A relaxation of the JV rule would give companies like Tesla Inc the opportunity to set up fully owned manufacturing operations in China. The automaker headed by billionaire Elon Musk has said in June that it’s working with the Shanghai government to explore local production. — Bloomberg