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.

China’s electric vehicle industry seems to be well on the road to global dominance. Dig a little deeper and the figures are less impressive than they first appear. In 2015, Beijing declared its plans to dominate the world’s electric car industry by the year 2025, and in 2016 Chinese car manufacturers planned to sell 500,000 electric vehicles in the domestic market. The target was met. About 340,000 of the half a million EVs were passenger cars, the rest were mostly buses. In contrast, manufacturers in the world’s second largest market, the United States, sold just 155,000 electric passenger cars.

What is more, China’s electric vehicles are manufactured overwhelmingly by locally-owned producers, not foreign joint ventures, and they are based on Chinese technologies. Last year China’s leading electric vehicle maker, Shenzhen-based BYD, turned out 100,000 cars. The leader in the U.S., Tesla, managed to sell 76,000 into its home market.

But the industry’s development also faces some issues. The rapid increase in electric car sales has been powered by generous government subsidies and incentives. Last year, China’s central government offered subsidies of CNY30,000 to buyers of plug-in hybrid cars, and as much as CNY55,000 to purchasers of pure electric cars. Some local governments offered additional subsidies of the same amount, to total 60% of the vehicle’s sticker price. Thanks to the subsidies, electric vehicles were competitive with conventional cars. On top of that, license plates for electric cars and plug-in hybrids are free. The prevalence of subsidies has meant almost every one of China’s 169 domestic car makers, most of which are backed by local governments, has rolled out models of electric cars. The majority are low-tech and of poor quality, and struggle to make sales in the commercial market.
As a result, the biggest customers for these cars are often the local governments that support their manufacture. Now the central government may cap the subsidies, and impose strict quotas for electric vehicle production on the country’s car manufacturers, which may have a serious impact on sales.

Chinese car manufacturer BYD announced that its net profits fell by 23.8% to CNY1.72 billion in the first half of the year, missing analysts’ expectations. Reduced government subsidies weighed on its sales of new energy vehicles (NEVs), while fierce competition hurt its photovoltaic business. BYD operates in three distinct business sectors: automobiles, mobile handsets, and rechargeable batteries and photovoltaics. For the first half of the year, the three segments posted revenues of CNY22.4 billion (down 4.1% from a year ago), CNY18 billion (up 10.25%), and CNY3.42 billion (down 15.75%), respectively. BYD said that it expected the divergent performance of its three business lines to continue into the latter half of the year.

Renault-Nissan and China’s Dongfeng Motor Group announced they will set up a new joint venture – Hubei-based, eGT New Energy Automotive Co, to develop electric vehicles in China. “This marks a deepened and strengthened strategic cooperation between Dongfeng and Renault-Nissan,” said Zhu Yanfeng, CEO of Dongfeng. Under the agreement, Renault will hold 25% of eGT, Nissan will own 25%, and Dongfeng the remaining 50%.

Ford Motor Co has signed a memorandum of understanding (MOU) with Chinese car manufacturer Anhui Zotye Automobile Co to establish a 50-50 joint venture to produce electric vehicles (EVs). Vehicles will be sold under an indigenous brand owned by the new joint venture.

The joint venture marks a major step for Ford’s electrification initiatives in China. Earlier this year, Ford said that 70% of its vehicles sold in China will have electrified powertrain options by 2025. China is the fastest-growing market in the world for new energy vehicles. In the first seven months of this year, sales of electric vehicles hit 204,000 units, up 33.6% year-on-year, according to the China Association of Automobile Manufacturers (CAAM). Ford expects the market for new-energy vehicles in China to grow to six million units annually by 2025, of which around 4 million vehicles will be all-electric.

China’s Great Wall Motor Co is interested in bidding for Fiat Chrysler Automobiles (FCA), a company official said, confirming reports it is pursuing all or part of the owner of the Jeep and Ram truck brands. FCA Chief Executive Sergio Marchionne is seeking a partner or buyer for the world’s seventh-largest automaker to help it manage rising costs, comply with emissions regulations and develop technology for electric and self-driving cars.

Great Wall Motor is China’s largest sport-utility vehicle (SUV) and pick-up manufacturer. If the deal goes ahead, it would be by far China’s largest overseas automotive industry deal – and possibly one of its largest ever overseas purchases – at USD20 billion dwarfing Geely’s acquisition of Volvo cars in 2010. FCA is larger than Great Wall, which has a market value of about USD16 billion.

Great Wall is especially interested in the Jeep brand, which targets sales of 2 million vehicles in 2018, up from 1.4 million in 2016, and could eventually reach 7 million a year as demand for sporty vehicles is set to keep rising. Great Wall said however that no talks had started yet.

Chinese car buyers used to visiting traditional car dealers, now have a new venue to include on their shopping itinerary – the car supermarket. The new format allows buyers to look at a large array of cars in one place and compare specifications and prices. Suning was among the first to jump on the “one-stop shop” bandwagon when it opened a car supermarket in Nanjing last month. The market displays both domestic and foreign models, including Maserati, Cadillac, BMW, Mercedes-Benz and Audi. It also provides a car leasing service, auto parts and after-sales maintenance. “For consumers, this is a way to save time, get to know more brands, and make decisions after careful comparisons,” said Liu Donghao, Manager of Suning’s Automotive Business Section. “We aim to break the mold of single-brand dealerships.” In the next three to five years, the company said it expects to open more than 100 car supermarkets in China. Gome Electric Appliances, a major rival of Suning, said it plans to add car sales areas in most of its 1,700 stores in China. “Gome has the advantages of a large number of stores in China,” said Zhang Haifeng, Manager of Gome’s car business. “Our stores are located in downtown areas, and that’s a strength in the automotive business.” However, car supermarkets are facing fierce competition from traditional car dealers and encountering some wariness by consumers. So far, foot traffic in the new supermarkets has been fairly light. Most of the car brands are luxury brands, but customers want to see all kinds of brands and models in different price ranges, one prospective buyer said. “Mainstream car manufacturers have spent a huge amount of time and money working with traditional car dealers. They are unlikely to abandon those ties to work closely with car supermarkets,” Luo Lei, Deputy Secretary General of the China Automobile Dealers Association, said.

As China clamps down on pollution, companies such as aluminum producer Novelis see a business opportunity. “The driving force behind our strategy in China is the nation’s increasingly strict policy against pollution,” said Pierre Labat, Vice President of global automotive at the Atlanta, Georgia-based company in the United States. Novelis is expanding its investment in China, particularly in the electric vehicle sector. The group, which has USD10 billion in annual revenue and 24 operating facilities in 10 countries, chose Changzhou, Jiangsu province, in 2012 to open its first manufacturing facility in China, because of logistics convenience and government incentives. With an initial USD100 million investment, the plant now boasts an annual production capacity of 120,000 tons of heat-treated aluminum sheet. The factory serves a rapidly growing demand for rolled aluminum used in lighter, more fuel-efficient vehicles. China’s sales targets for plug-in and hybrid vehicles are 7% of all sales in 2020 and 19% by 2025. “If we look at our total automotive sales in the world, China is about 10%, fairly small,” said Labat. “But it’s our fastest-growing market that yields the highest percentage of growth – six-fold explosive growth since we went there five years ago,” the China Daily reports.