Passenger car manufacturing foreign equity ratio restrictions to remove the countdown to entry Experts: The development of the domestic automotive industry will be more dynamic

The liberalization of the joint venture share ratio of automobiles in the passenger car field has entered the countdown, and the restrictions on foreign investment in the automotive industry are about to be completely abolished.

On December 27, the National Development and Reform Commission and the Ministry of Commerce issued the Special Administrative Measures for Foreign Investment Access (Negative List) (2021 Edition) and the Special Administrative Measures for Foreign Investment Access in Pilot Free Trade Zones (Negative List) (2021 Edition), which will further deepen the opening up of the manufacturing industry, and the two lists will be implemented from January 1, 2022.

In the field of automobile manufacturing, compared with the 2020 version of the document, the new list clearly states that the restriction on foreign ownership in passenger car manufacturing and the restriction that the same foreign company can establish two or fewer joint ventures in China to produce similar vehicle products will be abolished. In 1994, China issued the "Automobile Industry Policy" set a "ceiling of 50% of the shareholding ratio of foreign-funded enterprises", and from January 1, 2022, this industrial policy red line will withdraw from the historical stage.

It is worth mentioning that the relevant person in charge of the National Development and Reform Commission mentioned in response to a reporter's question on the 2021 version of the negative list of foreign investment access that in recent years, the country has deeply promoted high-level opening up, continuously relaxed foreign investment access, and launched a number of major opening up measures in the fields of finance and automobiles to provide a broader development space for foreign investment.

In fact, the cancellation of the foreign equity restrictions in China's automotive industry has long been finalized.

In April 2018, when the National Development and Reform Commission answered reporters' questions on the formulation of a new negative list for foreign investment and the opening up of the manufacturing industry, it publicly stated that the automotive industry will be opened up by different types: in 2018, the foreign ownership limit for special vehicles and new energy vehicles will be abolished; the foreign ownership limit for commercial vehicles will be abolished in 2020; the foreign ownership limit for passenger cars will be abolished in 2022, and the restriction on no more than two joint ventures will be abolished. After a five-year transition period, China's automotive industry will be fully open to foreign investment.

"The abolition of foreign equity restrictions in the automotive sector is the trend of the times. The liberalization of the joint venture share ratio of automobiles in the passenger car field means that the competition between domestic and foreign companies in the passenger car field will officially begin. In the original automobile joint venture industry policy, there are restrictions on the shares held by foreign parties, and in this context, the competition between domestic enterprises and foreign enterprises is still relatively weak. Now after the liberalization of the stock ratio competition will increase, especially passenger cars are the most important areas in the automotive industry, the abolition of restrictions such as the share ratio will have a great impact on China's automobile manufacturing industry, domestic enterprises to actively adapt to participate in the competition, or give up, this pressure is still very large. However, the Chinese government and the Chinese automotive industry are ready for the relaxation of restrictions such as the share ratio. Su Hui, executive director of the tangible market branch of the China Automobile Dealers Association, told the China Business Daily reporter.

"The liberalization of shares is more in line with the current needs of China's further reform and opening up than the restriction policy." Shi Jianhua, deputy secretary general of the China Association of Automobile Manufacturers, also said in an interview with this reporter that the restrictions on foreign ownership in the automobile field make the state-owned automobile group satisfied with the existing market interests, and the independent innovation power is insufficient, and only by opening up the stock ratio can we fully stimulate market vitality, force car companies to reform, adjust, accelerate innovation, promote the transformation and upgrading of the entire industry, and also make the automotive industry environment more fair and just.

"Brands like Geely and Great Wall have been facing the competition of joint venture brands in the process of development, so these companies have grown up and are not afraid of competition." I believe that independent brands have the strength and confidence to face these challenges head-on. Chinese auto companies should forge ahead in such a fair environment. Shi Jianhua said.

In fact, the reporter noted that since the "timetable" of the restriction on foreign ownership in automobile manufacturing was abolished, foreign car companies have accelerated their layout in China.

In July 2018, Tesla, the global "bellwether" of new energy vehicles, announced that it would enter China in the form of sole proprietorship and build a factory in Shanghai to produce new energy vehicles, becoming The first wholly foreign-owned car company in China.

Su Hui believes that the comprehensive cancellation of foreign investment restrictions in the automotive industry, although it will have a significant impact on China's automobile manufacturing industry, will not change the process of trends such as domestic independent automobile brand product exploration. "This trend of independent brands exploring products is a long-term development goal, and this development goal should not be abandoned, but should be adjusted and corrected with the objective situation and the current macroeconomic situation."

"It is believed that the government will introduce some policies and measures to promote economic and industrial development, including the introduction of some policies to promote automobile consumption, the comprehensive cancellation of the second-hand car relocation policy, and the further relaxation of the development of new energy vehicles, so as to make the development of the domestic automotive industry more dynamic." Su Hui said.