author: FutureCar Staff
Tesla owns 100% of its Shanghai plant, but the foreign ownership limit for other passenger vehicle (PV) joint ventures will be lifted on January 1, 2022.
Automakers looking to build and sell their vehicles in China will now be able to own all of their operations and factories in the country, further opening up the world’s largest auto market to foreign automakers.
The foreign ownership limit for passenger vehicle (PV) companies will be lifted on January 1, 2022, according to the 2021 version of the special management measures for entering the foreign investment market published by the National Development Commission and China’s reform (NDRC).
Since 1994, China’s auto industry policy has required that automakers building vehicles for the local market to avoid import duties do not own more than 50% of their joint venture operations.
Previous rules required automakers like General Motors and Ford Motor Co to form joint venture partnerships with a Chinese partner to build cars locally. It aimed to help Chinese automakers better compete with growing foreign competition from mainstream auto makers such as BMW, Ford Motor Co, Volkswagen AG and many others wishing to sell their vehicles in the country.
Foreign investors will also be allowed to create more than two joint ventures with their Chinese partners to manufacture the same type of vehicles from 2022, reports the Gasgoo media.
Foreign automakers will also be able to form wholly owned subsidiaries in China.
The caps on foreign ownership of local special vehicle and new energy vehicle (NEV) and commercial vehicle (CV) companies were removed in 2018 and 2020, allowing Tesla to establish operations in China. NEVs in China are classified as fully electric or hybrid vehicles.
Since Tesla only produces NEVs, it was the first American automaker to fully own its factory and operations in China. By building vehicles in China, the Austin, Texas-based automaker is exempt from import tariffs imposed on other automakers, allowing it to sell its electric vehicles at a lower price while maintaining its margins.
As the world’s largest auto market and one of the world’s largest electric vehicle markets, China is an important marker for Tesla to keep the company profitable. Thanks to the revised policy, Tesla was able to build its fully owned Shanghai factory in 2019.
Tesla’s Shanghai plant was designed to manufacture up to 500,000 vehicles per year and now builds more vehicles than its Fremont, California plant, which was once the company’s only global production facility.
Before the factory was built in China, Tesla exported all vehicles sold to China from the United States, meaning they were subject to high import tariffs which at one point increased by 25 % due to trade tensions between China and former Trump. administration.
Tariffs are currently set at 15%.
Tesla sold 56,006 Chinese-made vehicles in September, according to recent data from the China Passenger Car Association (CPCA), which tracks car sales. This is the largest number of vehicles since the Tesla plant in Shanghai started producing cars almost two years ago.
Now that automakers outside of China will be able to own all of their operations in the country, Tesla will likely face increased competition as rivals establish their own production facilities.