In recent months, political relations between Western powers and China have cooled, especially with the crisis in Ukraine, where China tries to stay out, and the latest crisis in Taiwan. International companies may or may not be affected by this.
Throughout more than 30 years, China it has been attracting foreign capital in the special economic zones and big cities to found industries with the support of local companies (forced, but supported after all). The automobile industry has been boosted by forced marriages.
The first foreign manufacturer that was able to break with this was Tesla, which benefited from a legislative change as of 2018 as it is a manufacturer of new energy vehicles, that is, as they call plug-in hybrids, pure electric, or hybrids in China. hydrogen fuel cell. Tesla set up his factory in Shanghai without forced marriage.
As of this year, the rules also change for the rest of the manufacturers, they can take more than 50% of the joint ventures that were set up with their Chinese partners. BMW invested to keep more of BMW Brilliance to regain control, although they could also keep everything. Stellantis, on the other hand, decided to divest and break up with GAC in an orderly manner.
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But to all this must be added the geopolitical tensions they can do to hostage makers. The situation is a little different from what happened in Russia, where there has been a commercial breakdown in a matter of days that has left several manufacturers directly unable to work, dependent on foreign components that were not there.
The possibility of that happening in China is not even remotely the same, so there is no need to fear a breakup that will force manufacturers to leave the country. Moreover, the local content of components is almost total, although it would be advisable to review the entire logistics chain to see if it has any weak points.
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To date, the policy of attracting foreign capital has been relatively correct with money from the West, and a climate of legal insecurity has not been created. Yes indeed, de facto restrictions have been imposed on human movement by the strict anti-COVID regulations of the Asian country. That has given a little more autonomy to the Chinese parties and there are more telematic meetings.
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Except in the case of Stellantis, which has failed in its relatively short union with GAC (about 10 years), the rest of the Western manufacturers have not fared badly if they have stuck to the rules of the game. There were some cases of failed introductionlike SEAT a few years ago, which without local production did not have competitive products with respect to cars that did not have import tariffs.
As long as the results accounts give, and enough is sold, there is no reason a priori to exit the Chinese market or divest from the local industrial footprint. It does make sense for Chinese parts of companies to be less dependent on the West for trade, and not be caught in the crossfire of inter-bloc economic sanctions.
An appetizer of what could happen was already seen when the president of the United States, Donald Trump, tightened the rope of trade relations with China almost to the extreme, imposing both powers back and forth tariffs on a growing list of products. Furthermore, the new Inflation Reduction Act pull a little more.
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And it is that manufacturers that are not in Canada, the United States or Mexico will not be able to give their clients the possibility of benefiting from a tax credit on hybrids and electric vehicles of up to 7,500 dollars. Secondly, a clear message was given to the battery industry: Make them in North America and cut all possible ties with China.
This is a consequence of the loss of control of the supply chain caused by the arrival of COVID and record inflation. Globalization is partly going backwards. But taking all this into account, if things are done in a more autonomous way on each continent, we can move forward.
At the moment there are no signs of disinvestment from the West, neither closure of companies nor their sale to others, what Stellantis with GAC has been rather an exceptional case. And while that happens, Tesla is maximizing its production for international markets in Shanghai, and almost all the cars of its brand that arrive in Europe come from there. And so they plan to continue, until Giga Berlin goes full steam ahead.