China lays out plan for opening auto industry, clearing the way for Tesla’s wholly owned plant

China said on Tuesday it will scrap foreign ownership limits on local auto firms by 2022, boosting companies such as Tesla which may wish to have a wholly-owned subsidiary in the world’s largest auto market.

The timetable of wider market access for foreign auto markers came after President Xi Jinping told the Boao Forum last week that China would cut import tariffs and relax foreign ownership restrictions. Currently, foreign carmakers are required to set up a joint venture with a local firm in which there’s a 50 per cent investment cap. 

The state planner, the National Development and Reform Commission (NDRC) said on Tuesday that China will scrap limits on companies making fully electric and plug-in hybrid vehicles in 2018, commercial vehicle makers in 2020 and lift restrictions on the wider passenger vehicle market by 2022.

Analysts believe new energy carmakers that wish to expand in China will benefit from the relaxation. 

“The growth of traditional carmakers have been pretty stable [under the mixed ownership model],” said Toliver Ma, auto analyst at Guotai Junan Securities in Hong Kong, adding that the fast growing electric vehicle market will become more competitive as a result of the relaxation on restrictions.

And it will still be some time before a wholly-owned foreign auto manufacturer is set up in China regardless of the implementation time frame by the government, according to Peter Chen, a Shanghai-based engineer with US component maker TRW.