Since 1994, foreign car companies looking to manufacture cars in China and escape steep import tariffs needed to form a 50:50 joint venture with a local firm.
The rule, introduced to help China’s infant auto industry as well as keep some profits at home, finally ends on January 1, 2022, the Chinese government announced on Monday.
Also getting scrapped is a rule that foreign car companies could only establish a maximum two companies in China, according to Forbes.
Chinese officials first hinted at the move as early as 2016 and started to ease restrictions in the ensuing years. For example, Tesla was able to establish a fully owned car plant in China in 2018. That same year, BMW was able to take a controlling stake in the joint venture it had with Chinese automaker Brilliance.
With the rule no longer in place, it will be easier for newcomers such as Lucid and Rivian to establish operations in China, which remains the single biggest market both for regular vehicles as well as electric vehicles.
Yet, some car companies may continue to maintain ties with local partners. The operation has become so thoroughly ingrained in business practice that some foreign car companies have said they wouldn’t be as successful in China without the joint ventures.