China may relax strict rules requiring foreign automakers to partner with Chinese companies before building electric vehicles within its borders. If such a change occurs, it carries potentially large ramifications for most of the world’s car manufacturers.
As the government pushes for an ever-increasing percentage of so-called New Energy Vehicles (NEVs) — electric and plug-in hybrid electric vehicles — the world’s largest electric vehicle market continues to grow at a very high rate. Opening the manufacturing market to purely foreign entities would allow the multi-national corporations to increase their efficiencies, ultimately reducing the cost of producing each NEV.
Discussing the developments with Bloomberg earlier this week, Jeremie Waterman, president of the China Center at the U.S. Chamber of Commerce, said, “We are encouraged by any discussion of market opening, but we hope future openings in autos will reflect the same level of unencumbered access that Chinese companies enjoy in the United States, Europe and other key markets across all auto manufacturing options.”
The potential move is part of a larger effort by the government to promote economic reforms and increase the Chinese presence in the global economy. Last year, it allowed foreign motorcycle companies to commence operations without requiring a joint venture partnership with an existing Chinese company.
More than just the interconnected economics are at play, though.
The rule, which requires at least 50 percent ownership by a Chinese corporation, was instituted over two decades ago as a means of gleaning the latest advancements in technical and manufacturing knowhow. Removing the restrictions represents a large philosophical shift away from China’s traditional protectionist policies, and toward a globalist perspective that recognizes national benefits of foreign investment.