China may soon allow foreign automakers to establish wholly-owned operations in China, possibly first in free trade zones (FTZs), according to heads of the country’s leading car associations. “Probably as early as next year, China will allow them to build wholly-owned facilities dedicated to new energy cars in its free trade zones,” said Dong Yang, Executive Vice President of the China Association of Automobile Manufacturers (CAAM) at a low-carbon car forum in Beijing. Fu Yuwu, Director of the Society of Automotive Engineers of China, said that the Chinese authorities will remove the ownership stake cap on carmaking joint ventures.

Currently, foreign carmakers wanting to produce cars in the country must have local partners and their stakes cannot exceed 50% of the joint ventures. China also has limits on the number of joint ventures a foreign carmaker can have, but since June partnerships dedicated to new energy cars are exempted from the rule.

Tesla could be one of the first foreign companies to set up a wholly foreign owned subsidiary in the Shanghai free trade zone (FTZ). But cars produced in free trade zones are not exempt from a 25% import tax, wiping out the cost advantage of producing in China.

Lifting of the investment cap for gasoline-powered cars is not expected in the near future, as Chinese car manufacturers are still building up their market share.