What the End of China’s Joint Venture Law Means for Automakers
China's car market just opened up a bit more.
China has been the world’s largest car market since 2009, but quantity does not mean quality. It’s been quite the ride watching its home-grown efforts shift from poor-quality reverse-engineered clones to competent vehicles that look halfway decent, at least from afar. Now things are about to change. China’s car market just opened up, as the country ended its joint venture requirement.
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As of January 1, China formally ended its requirement for foreign automakers to partner with local brands 50/50 to operate in the country. This rule, which was introduced in 1994, stated that any foreign automaker who wanted to do business in China must partner with a local company to do so.
Starting in 2022, that rule is abolished, allowing manufacturers to enter China without a Chinese domestic partner or for total foreign ownership of domestic Chinese brands. It also removes the limit of how many partnerships foreign companies can have with Chinese brands after a previous limit of two.
Why It Matters
Some have accused the joint venture relationship of being a great way for Chinese OEMs to siphon off technology from established foreign brands. These days, Chinese brands like SAIC Motor Corporation Limited, formerly Shanghai Automotive Industry Corporation, and First Automobile Works (FAW) have close ties with non-Chinese OEMs, and Chinese OEMs provide production facilities for other OEM’s. For example, Dongfeng produces the Nissan Sentra for the Chinese market. Elsewhere, SAIC manufactures all Buick Envisions, including the ones sold here in the US.
But within the past five to 10 years, many of these relationships have gone beyond simple manufacturing. For example, the Ford Equator from the Chinese and Philippine markets was developed with a Chinese automaker JAC. In Mexico, Dodge has finally redesigned the Journey and replaced it with a restyled GAC Trumpchi GS5.
Furthermore, SAIC partnered with GM to create SAIC General Motors Corporation Limited (SAIC-GM). Those two then partnered with Wuling to create SAIC-GM-Wuling Automobile (SGMW). The triad has had input into GM platform development, and its affiliate Wuling and Baojun brands use GM powertrain technology. It’s an immensely successful relationship that sees millions of cars sold all across Asia, and even rebadged and sold in Latin America.
As reported on MPR China Certification, China’s idea is to “increase the speed of manufacturing and raise the technological quality of the vehicles” while also helping to “increase foreign exports.”
China has a lot of EVs on roads made by brands that have partnerships with Western OEMs. This could prove a way to synergize even further and bring reasonably priced, vehicles to export.
What To Expect Next
Nobody from the Car Bibles crew has had the opportunity to drive any Chinese cars, but based on reviews from others, it appears the quality and creativity of modern examples are improving. Expect more tie-ups, acquisitions, manufacturing, or design to come straight from China. If U.S. tariffs become more favorable to Chinese imports, smaller, cheaper vehicles made and designed in China could find their way to our shores. That’s great for China’s goal of increasing exports, but America’s manufacturing base might be less enthused.
Your next vehicle, no matter if it’s an EV or an ICE-powered vehicle, could have some DNA or influence from a Chinese OEM.
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