China May Lift Restriction on Foreign Carmakers' Stakes in Joint Ventures

According to the mandate dating back to 1994, foreign carmakers are required to set up manufacturing plants in China via joint ventures with domestic companies. Here are a few examples of foreign automakers operating in partnership with indigenous manufacturers:

a. Hyundai - with BAIC Group

b. Volvo - Zhejiang Geely Holding Group Co.

c. Volkswagen - SAIC Motor and FAW Group

d. Ford - Changan Group

e. General Motors - SAIC Motor
The plan to lift the cap has found one of its primary patron in Li Shufu, chairman, Zhejiang Geely Holding Group Co.. Shufu believes lifting the restrictions will aid competition and, consequently, result in benefits for consumers. However, the China Association of Automobile Manufacturers is not too happy about the proposition. In 2014, the association had said lifting restrictions on foreign automakers would lead to Chinese brands being "killed in the cradle".

Though the future of the cap on foreign automakers in China is not yet certain, word has it that Tesla Motors is seeking a joint venture with the Jinqiao Group. With that said, Elon Musk took to Twitter a few days back to clarify that the company hasn't "signed anything for a factory in China".

One must note that the Indian government too has eagerly encouraged manufacturers to set up facilities in India, the world's 4th largest automotive market by volume. However, if China decides to go through with the proposed removal of cap on joint ventures,it may give the 'Make-in-India' campaign a run for its money. On the other hand, it could also benefit Tata Motors-owned Jaguar Land Rover's prospects in the Chinese automotive market, which sees ample demand for long-wheelbase cars and SUVs.

(With inputs from Bloomberg)