- Chinese auto industry is now open to the world as government has removed FDI limit which was at 50 percent
- Foreign automakers can now establish their wholly owned subsidiary in China
The Chinese auto industry is going to see some big changes beginning 1 January, 2022. This is about the foreign investment limit (FDI). In the end of 2021, China has announced to remove foreign investment limit in auto industry. This announcement comes from the country’s Commerce Ministry and the National Development and Reform Commission as well. After this, foreign automakers can now establish their wholly owned subsidiary in China.
Chinese Auto Industry
China has the world’s biggest car market. Passenger vehicles (PV) accounts for 80 percent of total sales here. Foreign firms like BMW, Honda, Nissan etc. operates with 50 percent Joint venture. As per the rules one automaker can only establish maximum two joint venture in the country. With new announcement, this rule will also be removed.
Some of the big automakers in China are SAIC Motor, DongFeng, FAW and BIC. All these are state owned. The SAIC Motor owns the MG Motor brand that operates in India.
The new rules can make foreign automakers to increase stake in their respective joint ventures in the near future. This will help them to establish their wholly owned subsidiary for passenger vehicles (PV) in China.
The companies who make electric vehicles (EV) like Tesla has already its wholly owned subsidiary as foreign investment limit rule didn’t apply to them from 2018. Two years ago, Tesla set up a factory in Shanghai by making full use of this rule.