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2016-07-21

China Revises Policy For Foreign Battery Manufacturers – Floodgates Now Open



The e30

The Chinese government pleasantly surprised the transportation industry by announcing the intention of lifting stake caps on foreign motorcycle and battery manufacturers who set up shop in Shanghai, Tianjin, Guangdong and Fujian.
Carmakers also are still being considered, but at a more tempered pace.
Previous policy required partnership with local companies, which needed to hold as least 50% in joint ventures.
“The amended rules governing foreign investment will apply to foreign companies setting up in the free trade zones of Shanghai, Tianjin, Guangdong and Fujian, the central government said in a statement Tuesday. Manufacturers such as Yamaha Motor Co. and Samsung SDI Co. previously were required to partner with local companies and could own as much as 50 percent of joint ventures.”
“The 50:50 rule, as it’s commonly known, is a central industrial policy introduced in 1994 to ensure that China’s then-fledgling auto industry can benefit from technology transfer by jointly operating factories with global auto companies such as Volkswagen AG and General Motors.”
Either something changed in minds of politicians towards ownership policies, or perhaps more likely, the government saw that the economy need to improve in particular regions of China, and the only way to achieve that was though a more free market, regardless of nationalist sympathy.
According to the article, motorcycle sales fell 15% year-over-year over the first six month of this year.
Earlier this year, Samsung SDI and LG Chem experienced problems in getting onto an approved list of suppliers to enable EV subsidies, because the government seems to prefer Chinese manufacturers. Samsung SDI is now trying to become BYD’s partner to work around the situation.
It is unclear if this new policy change might also lead to an opening of that protectionist policy as well – we suspect that if the regulation change was put in place to spur more investment in the country, opening the doors to the two largest battery players would be the most logical starting point. At the very least, now foreign battery makers will be free to produce and own 100% of their own product.