Industrial policies play a significant role in guiding the automotive industry. One of our tasks this year is to revise the automotive industry development policy. Regarding the issue of joint venture equity ratios, we will carefully study it with enterprises and ultimately reach a conclusion. This was stated by Lu Xi, Deputy Director-General of the Industrial Policy Department of the Ministry of Industry and Information Technology, at the closed-door meeting of the 2014 China Automotive Forum.
The "Automotive Industry Industrial Policy" promulgated and implemented 20 years ago clearly stipulates that China's automotive industry follows a 50:50 equity ratio for domestic and foreign parties in joint ventures. The policy that foreign investment cannot exceed 50% has been considered a red line for establishing complete vehicle joint ventures in China. As China emphasizes deepening market reforms, the debate over whether the foreign-domestic joint venture equity ratio in complete vehicle enterprises can be opened beyond 50% is heating up.
In an open market with sufficient competition, the weaker party will face greater pressure. However, with open cooperation, the gap between independent and foreign brands is narrowing. If the joint venture equity ratio agreement is relaxed at this time, the leading role, control, and voice in the development of joint ventures will be passive, especially as talent, procurement networks, and marketing networks will be attracted to foreign enterprises. I think this will have a significant impact on independent brand enterprises. This was stated by Xu Jianyi, Chairman of FAW Group.
Yin Tongyue, Chairman of Chery Automobile, also disagrees with relaxing the joint venture equity ratio. Relaxing the joint venture equity ratio would significantly harm Chinese auto companies. A joint venture company between Chery Automobile and Jaguar Land Rover will launch a new model in the fourth quarter. At the same time, the management structure and channels of the Chery Jaguar Land Rover joint venture company are also being adjusted, reflecting the interests of Chery Automobile and Jaguar Land Rover. If the joint venture equity ratio is relaxed at this time, it would not be good news for Chery Automobile.
It is understood that the revision of the automotive industry policy will strengthen how to guide the development and growth of independent auto brands from top-level design. Dong Yang, Executive Vice President and Secretary-General of the China Association of Automobile Manufacturers, said: We suggest that this version of the industrial policy study and formulate a sustainable development strategy for China's auto industry, guided by building a strong automotive nation and supported by protecting consumer interests.
