Beijing is said to weigh opening up to foreign electric carmakers

China is discussing a plan to allow foreign carmakers to set up wholly owned electric-vehicle businesses in its free-trade zones in a major revision of a fundamental principle governing the country’s auto industry policy since the 1990s, according to company officials briefed on the matter.

The plan, which is subject to change as a final decision hasn’t been made, could be put in place as early as next year, the people said, asking not to be identified as the deliberations are private. If the policy takes effect, it would be a landmark departure from the existing rules, which require foreign automakers to set up joint ventures with local counterparts.

A relaxation of the joint venture rule would give companies like Tesla Inc. the opportunity to set up fully owned manufacturing operations in China, the world’s biggest market for electric vehicles. Ford Motor Co. is exploring setting up a joint venture to produce electric vehicles in China with Anhui Zotye Automobile Co. while Volkswagen AG has partnered with Anhui Jianghuai Automobile Group Corp. to make electric cars.

China’s Ministry of Commerce, which is responsible for formulating policy governing foreign direct investments, said in an emailed response to Bloomberg News that it will “actively implement the opening up of the new-energy manufacturing sector to foreigners, together with other departments under the direction of the State Council.”

The ministry also referred to a notice issued in August by the State Council, or cabinet, in which it directed government agencies to broaden foreign investor access to areas including new-energy vehicle manufacturing.

China has been gradually opening up access to foreign auto manufacturers in free-trade zones. Foreign companies were allowed to set up 100 percent owned motorcycle and battery manufacturing operations in China since July 2016. The so-called 50-50 rule for Sino-foreign joint ventures was introduced in 1994 to ensure that China’s then-fledgling auto industry can benefit from technology transfer by jointly operating factories with global auto companies such as Volkswagen and General Motors Co.

Xu Shaoshi, then-chairman of the National Development and Reform Commission, said in June 2016 that the government is looking into lifting the 50 percent ownership cap. The policy has been criticized in recent years for shielding state-owned companies from competition and reducing the drive to build their own brands. Its supporters say the rule gives China’s automakers a chance to build enough scale and develop technology to withstand global competition.

Billionaire Elon Musk’s Tesla said in June that it’s working with the Shanghai government to explore local production. Shanghai has one of the 11 free-trade zones in China. The others are in provinces including Fujian, Guangdong and Zhejiang.

Even as a rising wave of governments and automakers get behind plug-in electric vehicles, Toyota Motor Corp. President Akio Toyoda said yesterday that hybrid technology will remain central to his company’s strategy.

“With hybrid technology at the center, Toyota will offer fuel-cell vehicles, plug-in hybrids, gasoline cars, and – although we’re a little bit late – electric vehicles,” Toyoda said. “We’re not thinking about deciding that now it must be EVs, and we’ll only do EVs.”

Battery-powered cars and gas-electric plug-in hybrids are poised to grow so fast that, by 2040, they’ll make up more than half of vehicles sold globally, according to Bloomberg New Energy Finance. Bloomberg

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