China Says It Will Follow Through With Promises To Open Up Its Auto Market

Apr 17, 2018
Originally published on April 18, 2018 11:19 am
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AILSA CHANG, HOST:

China today announced it's easing its rules on foreign carmakers over the next five years. The Chinese auto market is one of the largest and most lucrative in the world. But because of tough trade barriers, it's also been one of the hardest markets for foreign companies to enter. To understand how today's announcement changes that, we're joined by NPR's Sonari Glinton. Hey, Sonari.

SONARI GLINTON, BYLINE: Hey, hey, Ailsa.

CHANG: So what have been the restrictions China has imposed up until now?

GLINTON: So right now if you're a foreign car company trying to export into China, you have to have a partner, a Chinese company, where you share the costs, share the production, share the profits. They split everything 50-50. So you have to build it and work with these in-house Chinese companies to get a car. Now for electric cars, the carmakers could bypass that requirement. That's what this announcement says because it's a tremendous burden to have to build a factory with a partner.

And these partnerships really bug the carmakers because they fear - and it's not completely unwarranted - that the Chinese companies will take their trade secrets or in this competitive world, just learn from their best practices.

CHANG: OK, so what do the new rules being now more relaxed over the next few years, what will that mean for the auto industry?

GLINTON: Well, you know, the big, giant carmakers like General Motors and Volkswagen have been building cars in China and selling them in China for decades now. And they have these deeply entrenched relationships. What you need to think about are the smaller car companies that might want to export to China, Tesla or say Subaru.

CHANG: Yeah.

GLINTON: Like, yeah, exactly. Like, they - Tesla won't have to partner with a Chinese company to build cars there. They have a plant in the works. And a company like Toyota or GM could export electric cars to China. Now, what this really shows, I think, is the commitment of the Chinese government to electric cars. They have a mandate to clean up their air by 2035. And by lowering these barriers to electric cars, that makes reaching that barrier and those goals a lot easier.

CHANG: So how does this announcement about relaxing the rules, how does all of that play into the trade tensions between China and the U.S. right now?

GLINTON: Well, Ailsa, everything is connected, right?

CHANG: Yeah.

GLINTON: The president has been picking a fight over trade. And this is related but separate. What the Chinese are doing is making an announcement about trade and their own air quality. But they're also - this is also a sign of what's to come. We have our own 25 percent tariff on pickup trucks that are made outside of the U.S. And China is the biggest car market in the world and ours is the most lucrative. And if trade wars are tit for tat, then China is going to use whatever it can to open up that barrier.

And it's likely that other countries will be putting pressure on our trade barrier as well. So it is - all of it is connected. But remember that these are trade disputes, and they're complicated. And there's a lot of trash talk. And there's a lot of promises. And we don't know if it will happen by 2022, which is when that's promised. But I can tell you, all the carmakers want a more open Chinese market and all the global carmakers want a more open U.S. market. And this could move us closer to both those things.

CHANG: All right, that's NPR's Sonari Glinton. Thanks, Sonari.

GLINTON: Always a pleasure. Transcript provided by NPR, Copyright NPR.