Easing ownership limits in auto JVs to benefit consumers

China's plan to ease restrictions on stakes foreign carmakers can own in joint ventures with local partners and reduce automobile import tariffs will encourage competition in the domestic market and benefit consumers, experts said.

President Xi Jinping on Tuesday said at the opening ceremony of the Boao Forum for Asia Annual Conference 2018 that China would relax foreign ownership limits in automobile firms and will significantly lower import tariffs for vehicles.

Yale Zhang, managing director of Shanghai-based consultancy firm Automotive Foresight, said allowing foreign carmakers to have larger share in the world's largest automobile market will result in stiff competition for State-owned companies, but remains good for the overall market.

"It will help in the building of more competitive Chinese-owned brands," Zhang added. "If foreign carmakers are allowed to be more independent from the local partners, Chinese companies will need to work harder to gain a foothold in the market amid fierce competition. It will also accelerate the retirement of some incompetent brands. For consumers, the fierce competition could lead to more benefits."

Currently, foreign automakers can own up to 50 percent in their joint ventures with Chinese partners.

Volkswagen Group China said that it would strongly support and welcome China's latest move in its reform and opening-up strategy, saying there will be no impact on its current joint ventures.

"It will enhance confidence around the world in investing in China, and has a positive impact on innovation ability. We will carefully examine if there are also new opportunities for Volkswagen Group China," the company said.

But experts said that if trade frictions between China and the US continue to escalate, US carmakers will lose the competitive edge in the Chinese market.

The US has proposed $50 billion new tariffs on 1,300 Chinese products. In response, China last Wednesday announced additional tariffs of up to 25 percent on 106 products worth $50 billion imported from the US, such as cars.

Given this situation, lowering auto imports tariffs will benefit foreign countries other than the US, said Li Yanwei, an analyst at China Automobile Dealers Association.

According to China Automobile Dealers Association, China's tariffs on US cars may really sting Tesla and Lincoln, both of which have no factories in China. Statistics from the association show that Tesla sold 17,030 cars in China last year, accounting for 16.5 percent of its total global sales, while Lincoln sold 54,124 vehicles during the same period.