China eases limits as car show begins

Global car makers will show off their latest models at the Beijing Auto Show this week, days after China unveiled plans to shift gears in the world’s biggest car market by lifting foreign ownership restrictions.

Manufacturers Volkswagen, Daimler, Toyota, Nissan and Ford will be among the companies seeking the limelight in a country where 28.9-million vehicles were sold in 2017, a 3% increase from 2016.

Though sales lost steam compared with the previous year, foreign car makers are still eager to win bigger slices of a huge market as they face increasing competition from domestic companies investing in electric and self-driving vehicles. The Beijing Auto Show is a chance to display new models to Chinese car enthusiasts.

The event “is becoming the largest in the industry, no one can ignore China”, said Ferdinand Dudenhoeffer, director of the Centre for Automotive Research in Germany. The 2018 show could be dominated by “political” topics, he said.

The spectre of a trade war between Beijing and Washington worries car executives as it could bring their plans for China to a screeching halt.

But Beijing has announced it will liberalise foreign ownership limits in the sector, seen as a possible olive branch to President Donald Trump, who has complained about China’s rules for the industry. China restricts foreign car firms to a maximum 50% ownership of joint ventures with local companies. But the changes will end shareholding limits for new energy vehicle firms in 2018, followed by commercial vehicles in 2020 and passenger cars in 2022.

So far the news has been greeted with caution by the world’s car makers.

Daimler, the parent company of Mercedes, said it would “monitor developments in regulations closely” and Volkswagen said it would “carefully analyse” the changes.

On the floor of the giant China International Exhibition Centre, car executives may offer a more detailed take.

“They have a decision to make: do they want set up production facilities in which they have a bigger share, or do they want expand their joint ventures or try to purchase shares back from their partner,” said Bill Russo, MD at Gao Feng Advisory Group, noting most would find it difficult to restructure their current joint ventures.

Russo noted the policy could be positive for companies like Tesla which has resisted taking a Chinese joint venture partner.

President Xi Jinping has also pledged a “substantial” reduction in tariffs on imported cars by the end of 2018 — a boon for highend brands, even if the volumes remain limited at the moment.

China charges a 25% import levy on vehicles, with luxury cars hit especially hard by additional taxes.