Cars parked at the Great Hall of the People in Beijing in this file pic. — Reuters

BEIJING/SHANGHAI: China will scrap foreign ownership caps on local auto companies by 2022 and will remove restrictions on new-energy vehicle ventures this year, a major shift that will open the market wider to carmakers from Nissan to Tesla Inc.

The country will remove limits on firms making fully electric and plug-in hybrid vehicles in 2018, commercial vehicle firms in 2020 and the wider passenger vehicle market by 2022, China’s state planner said in a statement.

The move, which comes amid a trade standoff between Washington and Beijing, signals the end of a rule put in place in 1994 in the world’s largest auto market limiting foreign carmakers to owning a 50 percent share of any local venture.

The policy was implemented to help support domestic carmakers compete against more advance international rivals.

Analysts said the main beneficiaries, at least in the short-term, would be carmakers focused on new-energy vehicles, including US electric carmaker Tesla, which has been seeking to set up a wholly owned plant in Shanghai.

Tesla chief Elon Musk said last month China’s tough auto rules for foreign firms created an uneven playing field as scores of local and international companies compete for a slice of China’s fast-growing market for “green” cars.

Tesla was not immediately available to comment today.

The looser rules would likely raise pressure on domestic carmakers, potentially hitting local names like Warren Buffett-backed BYD Co Ltd.

Traditional automakers will need to wait longer for any direct impact and may even see more risks than opportunities in ditching their joint venture structures, said James Chao, Asia-Pacific chief at consultancy IHS Markit.

“Foreign companies may already be in a box (in China),” said Chao, adding the joint venture structure was now so ingrained many might not want to change it.

“While getting a bigger share could be advantageous in terms of boosting profits, they may actually be already too dependent on their Chinese partners to sever those ties.”

A senior General Motors Co executive said last week that even without ownership caps the US carmaker would not cut ties with local partner SAIC Motor Corp Ltd, adding GM would not be as successful in China on its own. The person asked not to be named because of the sensitivity of the matter.

GM said last week the firm’s “growth in China is a result of working with our trusted joint venture partners”.

Japan’s Nissan Motor Co Ltd said in a statement it would “monitor how any specific policies develop and will plan accordingly”.

Honda Motor Co Ltd said its China business had grown on the back of strong local tie-ups. “At the moment, we have no plans to change our capital relationship,” a Honda spokesman said.

China will also scrap foreign ownership limits in the ship and aircraft manufacturing industries in 2018, the National Development and Reform Commission (NDRC) said.

Airbus SE and Boeing Co did not immediately respond to Reuters’ requests for comment.

The highly symbolic moves in autos come after President Xi Jinping said last week the country would scrap ownership limits “as soon as possible”, exciting global auto brands even as China and the United States spar over trade tariffs.

China - which said the easing of autos rules is unrelated to its trade dispute with the United States - is keen to portray itself as open for business. Its ties with the world’s largest economy though are becoming increasingly fraught.

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