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China to drop foreign ownership restrictions for car factories

China to drop foreign ownership restrictions for car factories

by Justin King

American automakers are currently forced to form 50:50 joint ventures with local Chinese firms.

China is apparently planning to eliminate foreign ownership restrictions for automobile factories.

To build cars in the world's largest automotive market -- and avoid steep import tariffs -- foreign automakers are currently forced to create 50:50 joint ventures with Chinese companies.

The big three US automakers long ago capitulated to the joint-ownership scheme. Tesla has held out and pressured the Chinese government to remove the foreign ownership cap or drop its 25-percent import tariffs for foreign cars.

To be clear, I think a fair outcome for all is quite likely. China has already shown a willingness to open their markets and I believe they will do the right thing.

— Elon Musk (@elonmusk) March 9, 2018

Tesla will be among the first companies to potentially benefit from the relaxed regulations, as the foreign ownership caps will be lifted this year for companies making EVs and plug-in hybrid vehicles, according to Reuters. Other automakers will have to wait until 2022.

A few automakers have issued carefully worded statements, welcoming the changes but without indicating any change to their existing joint venture relationships.

"We believe a more free and flexible business environment will benefit both Chinese and foreign companies in China and the Chinese economy," BMW said. "BMW will continue pursuing mutual benefit and win-win solutions with the local partners."