Will China open up to foreign electric vehicle makers?

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Last week, reports revealed that China, currently the biggest market for vehicles in the world, has plans to allow foreign carmakers to set up their own electric vehicle businesses in the free-trade zones.

This means that it may no longer be required for these foreign companies have joint ventures with local Chinese counterparts–a rule that has existed since the 1990s.

A report by Bloomberg, which highlights that there’s no official announcement and final decision yet, says that this potential new rule could give a company like Tesla a chance to fully set up a manufacturing business in the country.

Another article by Forbes, however, pointed out that if the new rule is implemented, it will not exactly give Tesla freedom to make its EVs anywhere in China. “The rule, if passed, would allow the EVs to be made without a joint venture partner in one of China’s free trade zones,” the report added. “Free trade zones are exterritorial for customs purposes. Once the product leaves the free trade zone, the import tariff is charged as if the car came by boat from a far-away country.”

Talking about green cars, Wang Chuanfu, CEO of Chinese electric vehicle maker BYD, told reporters: “China’s government has become more open with its policies…more foreign companies will probably come in solo from now on.”

According to the Bloomberg report, companies such as Volkswagen and Ford still haven’t made any changes to their joint ventures in the country.

Tesla, which does not have a production base there, has not commented on the issue, but CEO Elon Musk said in June that it was working with officials from Shanghai (a free trade zone) to explore local manufacturing. No further announcement has been made.

Other free trade zones in China include Tianjin, Guangdong, and Fujian.

Liu Enzhi, a professor at the Tianjin University of Finance and Economics, said: “Wholly foreign-owned businesses within China’s free trade zones would also still be subject to a 25% vehicle import tariff when selling their products in the rest of the country because such zones are technically considered outside of China for customs purposes.”

Confirmation of the new rule is expected to be announced next year, but no official report has surfaced so far.

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