New policies are set to curb foreign investment in the Chinese car market.
The government will reconsider prioritising foreign companies investing in the auto industry in an effort to promote emerging fields and local companies. For the last seven years the National Development and Reform Commission (NDRC) has made China an attractive investment opportunity through a number of beneficial policies, including reduced tariffs on imported plant equipment, which it plans to cease as of this year.
However, the NDRC has said they will still encourage foreign investment in fuel-efficient vehicles and the announcement does not seem to have deterred the likes of Opel, which announced a potential link up with domestic car maker SAIC.
Kia is one of many overseas car makers to build plants in China Image: Kia Motors |
Favourable policies towards technologically superior foreign companies, together with unparalleled growth, has attracted some of the world's largest carmakers, including GM, VW, Toyota and Ford, to spend billions in plant investments and research spending.
According to LMC Automotive analyst Jenny Gu, companies will now find it more difficult to secure approvals to build new plants in the future, unless they have new-energy vehicles.
The policies are aimed at curbing excess production by preventing foreign automakers from forming new joint ventures, but industry experts speculate this could cause problems for foreign firms already operating within China.
Chongqing Changan Automotive Co operates a three-way joint venture with Ford Motor Co and Mazda Motor Co, Changan Ford Mazda Automobile Co, which it wants to break down into two separate enterprises. However, after worker strikes in 2009 the government has blocked all attempts to transfer the necessary licenses to do so.
Industry expert Yang Jian fears this red-tape may prove sticky in the years to come, and Changan's inability to secure new licenses may end up hampering Ford and Mazda sales.