Shanghai to speed up removal of foreign ownership limits after Tesla deal

By David Stanway

SHANGHAI (Reuters) – Shanghai will accelerate efforts to lift restrictions on foreign investment in the auto manufacturing sector, a government official said on Wednesday, a day after Tesla announced it would build a wholly-owned car plant in the city.

Earlier this year, China announced it would remove foreign ownership caps for companies making fully electric or plug-in hybrid vehicles by 2018 and all auto companies by 2022. The announcement marked a major policy shift in the world’s largest auto market, which has capped foreign ownership in the sector at 50% for more than two decades.

Huang Ou, deputy director of the Shanghai Economic and Information Technology Commission, told reporters at a press conference that the city government is engaged in preparations to support the Tesla project, which is expected to be Shanghai’s largest foreign investment project.

“The next step for the city government is to carry out the support work to enable the project to be operational as quickly as possible,” he said.

“In accordance with the state plans, we will accelerate the cancellation of restrictions on foreign ownership in the automobile manufacturing sector,” he said.

Huang, however, declined to comment on the size of the project or when construction would begin on a factory with a capacity to produce 500,000 Tesla battery-powered electric cars a year – a large size by auto industry standards.

Tesla CEO Elon Musk signed a deal Tuesday to build a new auto plant in Shanghai, the automaker’s first outside the United States. It would double the size of the electric carmaker’s global production.

The deal was announced as Tesla raised prices on U.S.-made vehicles it sells in China to offset the cost of tariffs imposed by the Chinese government on U.S. imports in retaliation for U.S. President Donald Trump’s tougher tariffs on Chinese goods.

Building a car assembly plant half the size of the one Tesla is planning in Shanghai would typically cost $1 billion, according to auto industry officials and experts.

The Shanghai government said in a statement Tuesday that it welcomed Tesla’s decision to invest not only in a new factory in the city, but also in research and development.

Chinese magazine Caijing, citing sources familiar with the project, reported on Tuesday that the exact location of the plant had not yet been decided and that construction would begin early next year.

(Reporting by David Stanway; Writing by Brenda Goh and Norihiko Shirouzu; Editing by Himani Sarkar and Neil Fullick)