China Lifting Non-Domestic Ownership Rule

Right now (i.e., 12/28/21) a non-Chinese OEM that has an operation in China that isn’t building EVs can only operate through a 50-50 joint venture with a Chinese company.

In a few days (i.e., 1/1/22) that will change. Nikkei Asia reports that yesterday (i.e., 12/27/21) the Chinese Ministry of Commerce and the National Development and Reform Commission lifted the requirement as of the first of January.

Right now, there is an array of OEMs that have 50-50 joint ventures with Chinese partners.

Does this mean that they’ll suddenly buy out their partners and go for the whole thing?

Probably not.

Why?

It is undoubtedly a good thing to have a Chinese partner who can help with indigenous issues that may not be recognized by someone who is not absolutely embedded in the country and its culture. Even though a company may have people who have been in a given country for a number of years (be it China, the U.S. or anywhere else), not everything that someone who has lived there all of their lives simply knows can be understood by someone who hasn’t had that experience.

While there may be increases in the level of ownership of the various OEMs for financial reasons, odds are things aren’t going to change on a wholesale basis.

Presumably the non-Chinese OEMs have worked to develop good relationships with their partners. So there isn’t a whole lot of upside to throwing a wrench in those works.

The global auto industry is simply getting a bit more global.

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