The new year will bring some significant changes for carmakers that had plans to invest in China as the world’s most populous country will stop encouraging foreign investment in the auto industry putting an end to seven years of benefits that included reduced tariffs on imported equipment.
China’s National Reform and Development Commission (NRDC) and the Ministry of Commerce made a joint announcement on the move that is due to come into effect on January 30, 2012.
According to Xinhua, which is the official press agency of the government of the People’s Republic of China, the decision was made “because of the need of the healthy development of domestic auto making”.
Recently, China also slapped new duties on U.S.-made cars that are imported into the country.
While the full implications of China’s decision remain to be elucidated, Jenny Gu, a senior market analyst at LMC Automotive in Shanghai told Bloomberg news “it might be more difficult for [foreign] carmakers to get approval for new plants in the future unless they have an investment in new-energy vehicles”.
In the first 11 months of 2011, vehicle sales in China grew 2.6 percent over the same period in 2010, with passenger car sales increasing by 5.3 percent to 13.1 million units, according to the China Association of Automobile Manufacturers.
However, even though China is lifting its support to foreign investments in the auto industry, according to Xinhua, the government will “open more sectors to foreign investors and encourage investment into energy-saving and environmentally-friendly technologies, new-generation information technology, biotechnology, high-end equipment manufacturing, alternative energy, advanced materials, and alternative-fuel cars.”
