Automakers pump brakes on China’s open-market plan

Xi’s initiative said to lack details, muscle to stave off Trump’s tariffs threat

BEIJING — When President Xi Jinping announced measures to further open up China’s auto industry to foreign carmakers, the global industry initially cheered. Now the cheering has stopped. As details are emerging, foreign auto executives attending China’s annual auto show in Beijing this week said Xi’s initiative was too narrow and vague to change business on the ground. That means the initiative may not be a strong enough starting point for talks to stave off the Trump administration’s threats to impose tariffs on $150 billion in Chinese-made goods.

Central to Xi’s plan is that it will allow foreign automakers to own Chinese factories, instead of working through a 50-50 Chinese partner, as is currently required. But auto executives in Beijing said they were comfortable with the current system.

“It would be crazy to think you can do it all yourself, in a market that is so different,” said Trevor Worthington, Ford’s vice president for product development in Asia and the Pacific.

Autos on the agenda

President Donald Trump is sending to Beijing late next week a negotiating team that includes Treasury Secretary Steven Mnuchin and the U.S. trade representative, Robert Lighthizer. Autos are one of the issues on the agenda. The Trump administration has accused Beijing of forcing foreign companies to share or reveal their technology as a price of doing business in China, particularly in electric cars.

Xi’s plan to further open up China’s auto market was seen as a potential olive branch. It calls for phasing out by 2022 the Beijing government’s requirement that any foreign automaker that wants to make cars in China do so through a 50-50 joint venture with a Chinese car company. For makers of electric cars, the requirement would end this year. He also said that China would reduce its 25 percent tariff on imported cars, without offering details.

Plan could help startups

The plan could help companies setting up new factories, especially upstarts like the electric vehicle company Tesla Motors.

But established carmakers like Daimler, Volkswagen and Ford said at the auto show on Wednesday that they planned to keep their joint ventures the way they were. The companies have already moved their production and auto parts supply chains to China. And foreign auto companies have found making cars in China for local drivers quite profitable.

“We will maintain the structure as we have today,” said Rupert Stadler, chairman of Audi, the luxury arm of Volkswagen of Germany. Referring to Audi’s two joint ventures in China, he added, “For us it is very clear: We will, in the long run, have two feet on the ground in China.”

At the same time, executives said that some of their biggest trade concerns have not been addressed. These include China’s insistence that electric cars have batteries that are made in China, not imported. Local subsidies for electric vehicles, which total as much as $9,000 per car, are available only for cars with batteries that were manufactured in China. The subsidies have helped make China the world’s largest market by far for electric cars, so carmakers have rushed to shift their supplier networks to China.