For­eign au­tomak­ers score as China lifts re­stric­tions

USA TODAY US Edition - - MONEY - Nathan Bomey

Tesla, Gen­eral Mo­tors, Volk­swa­gen and other au­tomak­ers scored a big win Tues­day as China an­nounced plans to lift strict rules re­quir­ing for­eign car com­pa­nies to share prof­its and op­er­a­tions with lo­cal firms.

The de­ci­sion comes af­ter Pres­i­dent Xi Jin­ping re­cently sig­naled plans to lower im­port tar­iffs and ease own­er­ship re­stric­tions in a move widely viewed as a bid to avert a trade war with the U.S.

It likely will make it eas­ier for Amer­i­can car com­pa­nies — not to men­tion Ger­man, Ja­panese and Korean au­tomak­ers — to rack up prof­its in China, the world’s largest au­to­mo­tive mar­ket.

Pres­i­dent Trump has been fiercely crit­i­cal of the coun­try’s trade poli­cies and in­tel­lec­tual prop­erty han­dling and has threat­ened steep tar­iffs.

China no longer will require for­eign au­tomak­ers to es­tab­lish joint ven­tures with lo­cal com­pa­nies to man­u­fac­ture ve­hi­cles in the coun­try.

The reg­u­la­tion will be phased out within five years.

It’s a pro­found break from the past for China, which, crit­ics say, es­tab­lished the pol­icy to help its do­mes­tic auto in­dus­try grow with­out gaining tech­no­log­i­cal prow­ess and man­u­fac­tur­ing know-how on its own.

Nearly 29 mil­lion ve­hi­cles were sold in China in 2017. That’s about 11 mil­lion more than U.S. con­sumers bought.

The change is ex­cel­lent tim­ing for Cal­i­for­nia-based elec­tric-ve­hi­cle maker Tesla, which has sig­naled plans to build a plant in China. Un­der the new rules, the com­pany will not have to share op­er­a­tions with a joint venture part­ner.

The new par­a­digm could also lead to greater prof­its for GM, Volk­swa­gen and other au­tomak­ers with a sig­nif­i­cant pres­ence in China, in­clud­ing Ford Mo­tor. GM, for ex­am­ple, sells more ve­hi­cles in China than it does in the U.S.

De­spite the fi­nan­cial caps, au­tomak­ers may be re­luc­tant to chart an im­me­di­ate change of course. In many cases, they have ben­e­fited from strate­gic part­ner­ships with lo­cal au­tomak­ers, such as GM’s deal with a com­pany called SAIC, par­tic­u­larly be­cause of the part­ner’s help in nav­i­gat­ing China’s byzan­tine bu­reau­cracy.

It may also prove dif­fi­cult from a le­gal per­spec­tive for au­tomak­ers to with­draw from cur­rent deals.

The Amer­i­can Au­to­mo­tive Pol­icy Coun­cil, which rep­re­sents auto in­ter­ests, was not im­me­di­ately avail­able for com­ment Tues­day.

Chi­nese state me­dia ac­knowl­edged spec­u­la­tion that the changes will hurt Chi­nese au­tomak­ers but quoted mul­ti­ple com­pa­nies say­ing they be­lieve it will help, in part be­cause of the coun­try’s grow­ing ex­per­tise in elec­tric cars.

“It’s not some­thing to be afraid of con­sid­er­ing China’s strength in tech­nol­ogy, cap­i­tal, man­age­ment and tal­ent,” Fu Yuwu, head of the So­ci­ety of Au­to­mo­tive En­gi­neers of China, told China’s Xin­hua state news agency.

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