China to remove caps on foreign ownership of local PV ventures from Jan. 1, 2022

Shanghai (Gasgoo)- China will scrap a limit on foreign ownership of passenger vehicle (PV) ventures starting Jan. 1 2022, according to the 2021 version of the Special Management Measures for the Market Entry of Foreign Investment (Negative List) issued by China’s National Development and Reform Commission (NDRC), aiming to further opening up the world's biggest car market.

China issued in 1994 the Automobile Industry Policy, which limited foreign carmakers to owning no more than a 50% share of any local venture. The policy was set to help domestic carmakers compete.

The latest policy move means that foreign investors will be allowed to have more than 50% shareholding of a PV entity, and even form a wholly-owned subsidiary in China. Foreign investors will also be permitted to set up more than two PV joint ventures with their Chinese partners to manufacture the same type of vehicles from 2022.

Prior to the latest restriction removal, the caps on foreign ownership of local special vehicle & new energy vehicle (NEV) ventures and commercial vehicle (CV) firms were removed in 2018 and 2020 respectively, according to the NDRC's policy released in 2018.

Thanks to the policy, Tesla broke ground on Giga Shanghai in early 2019, the first production facility in China wholly owned by a foreigner investor.