China to scrap foreign auto ownership limits by 2022

BEIJING/SHANGHAI (Reuters) – China will scrap foreign ownership caps on local auto companies by 2022 and will remove restrictions on new-energy vehicle ventures this year, a major shift that will open the market wider to carmakers from Nissan (7201.T) to Tesla Inc (TSLA.O).

FILE PHOTO: Cars are parked at the Great Hall of the People during the opening session of the 19th National Congress of the Communist Party of China in Beijing, China October 18, 2017. REUTERS/Thomas Peter/File Photo

The country will scrap the limits on firms making fully electric and plug-in hybrid vehicles in 2018, commercial vehicle firms in 2020 and lift restrictions on the wider passenger vehicle market by 2022, China state planner said in a statement.

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The moves signals the end of a long-standing rule in the world’s largest auto market where foreign carmakers can currently only own a 50 percent share of any local venture, a policy put in place to help support domestic carmakers compete against more advance international rivals.

The move also comes after President Xi Jinping said last week the country would scrap ownership limits “as soon as possible”, encouraging global auto brands even as a fierce standoff over trade intensifies between Beijing and Washington.

The rule change could boost U.S. electric vehicle maker Tesla, which has been seeking to set up a wholly owned plant in Shanghai. Tesla chief Elon Musk said last month China’s auto rules created an uneven playing field.

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Tesla and scores of others from traditional automakers to technology firms are all competing for a slice of China’s fast-growing new-energy vehicle market as the country looks to impose tough new tariffs to encourage production of “green” cars.

China will also scrap foreign ownership limits in the ship and aircraft manufacturing industries in 2018, the National Development and Reform Commission (NDRC) said.

Reporting by Norihiko Shirouzu in BEIJING, Adam Jourdan in SHANGHAI and Beijing Monitoring Desk; Editing by Edwina Gibbs and Christopher Cushing

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