To Expand Electric Car Production, China Lifts Restrictions on Foreign Automakers

By · April 17, 2018

The Volkswagen-JAC iEV7S concept

China said today that it would soon make it easier for foreign automakers to fully own auto factories in the country. China has long required major carmakers to partner with a Chinese firm before building a factory. The rules will be relaxed as soon as late 2018 for makers of electric vehicles—while companies producing conventional vehicles would continue to face ownership restrictions for about five years.

The shift is part of China’s efforts to accelerate the production and use of electric vehicles. China is already the world’s largest EV market, surpassing the United States in 2015. The government wants to put 7 million electric vehicles on its roads by 2025. Electric vehicles are among 10 key industries in Beijing’s “Made in China 2025” plan—intended to make the country more self-sufficient.

China sold 777,000 “new energy” cars in 2017. More than 80 percent of these cars sold are electric vehicles. (About 200,000 plug-in cars were sold in the U.S. in 2017.) China is also ramping up the deployment of EV chargers. In a plan announced last month, China’s central government raised its purchase incentives for electric cars from about $7,000 to $8,000.

The change in rules regarding foreign partnerships could encourage Tesla to open a factory in China in the next year. Tesla could establish a production facility for the Model 3 or Model Y in China—without a joint venture with a Chinese corporation. This would allow Tesla to better control its technology and retain all its profits.

Nearly every major foreign automaker is involved with a joint venture to produce electric vehicles in China. The country’s zero-emission vehicle mandate—which bears some resemblance to California’s program—starts next year.

Volkswagen, in particular, has ambitious plans to build electric cars in China. Pictures of new EVs built in China by Volkswagen emerged this week. The vehicles are being made as part of VW’s joint venture with JAC. The first of three vehicles is based on the iEV7S concept. The small SUV is rumored to cost about $19,000 after subsidies and to provide as many as 175 miles on a single charge. The new electric SUV could utilize Volkswagen’s SEAT brand.

The Buick Enspire EV concept

Buick, a General Motors brand, today revealed its all-electric Enspire SUV—a vehicle with 370 miles of range and capable of accelerating from zero to 60 miles per hour in less than four seconds. The Enspire, still in the concept phase, might only be sold in China. Earlier this month, Buick announced that it would introduce a pair of new models at the Beijing auto show that opens to the public next week.

China’s EV industry is expected to be shaken up in the coming years, with consolidation among large domestic rivals and acquisition of smaller electric car start-ups. With the growth of the Chinese market for EVs—and concomitant improvements in manufacturing and reduced costs—analysts believe that low-cost high-quality electric vehicles made in China could be sold in the United States in the next few years.

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