China will remove restrictions on overseas investment in domestic passenger car manufacturing from January 1, 2022, as reported by CNBC on December 27. The announcement came as a document regularly released by China’s NDRC and the Ministry of Commerce (MOFCOM) to list sectors restricted from foreign investment excluded the passenger car manufacturing industry in its publication on December 27. Since 1994, China has required foreign companies to form a joint venture (JV) with local enterprises to get access to the domestic passenger car industry. Moreover, foreign companies can hold up to 50% equity in the JV, before the maximum ownership was loosened to 70% in 2018.

China set a timetable in 2018 to gradually open up its automobile industry to foreign capital. It fulfilled the plan by lifting ownership restrictions for special cars and new energy vehicles (NEV) in 2018 and commercial cars in 2020. The opening-up policy has prompted Tesla [TSLA:US] to establish a factory in Shanghai in 2018, making it China’s first vehicle factory wholly owned by foreign capitals. Moreover, both Volkswagen [VOW:GR] China and Audi have raised their stake in the JVs with local automakers to over 50% in response to the eased investment policies. According to an NDRC official, China has provided more availability to overseas investors in the domestic financial and auto sectors. However, foreign investments in over 31 sectors of China are still prohibited or restricted at present, such as rare earth, film production and distribution, and tobacco products.

Sources:

https://www.cnbc.com/2021/12/27/china-to-remove-foreign-investment-limit-passenger-car-manufacturing.html

https://www.caixin.com/2021-12-27/101822794.html

https://www.carscoops.com/2021/12/china-will-no-longer-require-foreign-carmakers-to-form-joint-ventures/

https://www.electrive.com/2021/01/18/audi-reveals-new-details-about-ev-joint-venture-with-faw/