China to Open Auto Market As Trade Tensions Simmer

China will scrap a limit on foreign ownership of automotive ventures by 2022 in a major policy shift to open up the world’s biggest car market, even as trade tensions simmer between Washington and Beijing.

In a move welcomed by Germany’s powerful car industry, China’s state planner said on Tuesday it would remove foreign ownership caps for companies making fully electric and plug-in hybrid vehicles in 2018, for makers of commercial vehicles in 2020, and the wider car market by 2022, Reuters reported.

China imposed ownership restrictions in 1994, limiting foreign carmakers to owning no more than a 50% share of any local venture. Forcing foreign carmakers to work with Chinese firms was designed to help domestic carmakers compete.

Germany’s BMW, which has a big stake in trade relations between Beijing and Washington as the biggest exporter of vehicles from the United States to China, welcomed the car decision.

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

BMW added it remained committed to expanding a joint venture with China’s BBA and was still discussing how to structure a new partnership for its Mini brand with China’s Great Wall Motors.

Analysts said the main beneficiaries, at least in the short term, would be manufacturers focused on new-energy vehicles, including US electric carmaker Tesla, which has been seeking to set up its own plant in Shanghai.