Bloomberg News

GM Downplays China’s End of Policy to Attract Foreign Investment

December 30, 2011

Dec. 30 (Bloomberg) -- General Motors Co., the biggest overseas automaker in China, downplayed the risks to its expansion plans in the world’s largest car market after the state ends a seven-year policy to attract foreign investments.

“We expect the new guideline to have minimal negative impact on GM’s future plans in China,” the Detroit-based company said in a statement today. Dayna Hart, a Shanghai-based spokeswoman at GM, didn’t elaborate on the statement.

Yesterday’s announcement, which comes two weeks after China announced it would impose punitive tariffs on U.S.-made vehicles, means overseas carmakers will probably face difficulties getting state approval to build future plants in the country, according to research firm LMC Automotive. Global automakers are counting on China and the U.S. to drive growth next year as Europe’s debt crisis hampers the region’s economy.

Officials at Volkswagen AG and Ford Motor Co. declined to comment on how the changes in government policy will affect their business in China and said current investments won’t be hurt.

Daimler AG and Toyota Motor Corp. officials didn’t immediately respond to e-mails, while Akihiro Nakanishi, a Guangzhou-based spokesman for Nissan Motor Co., declined to comment.

The new rules will go into effect Jan. 30, China’s National Development and Reform Commission and the nation’s commerce ministry said in a statement yesterday. The move, meant to allow for a “healthy development” of China’s auto industry, won’t apply to foreign investments in fuel-efficient vehicles, which will still be encouraged, they said.

Foreign Benefits

Previous benefits enjoyed by the foreign carmakers included reduced tariffs on imported plant equipment, said Jenny Gu, an analyst at LMC Automotive in Shanghai.

Although foreign companies are required to partner with a domestic company to manufacture cars in the country, Chinese producers are struggling. Though China has more than 70 automakers, the bottom 55 only account for 11 percent of the vehicle sales, according to the China Association of Automobile Manufacturers.

“VW will work toward fulfilling its expansion plans in China, which include actively developing electric cars and new- energy vehicles, and will continue to bring in fuel-efficient technologies and products,” Wolfsburg, Germany-based VW said in a statement.

Kevin Wale, GM’s China president, said in a Bloomberg Television interview this month that the company plans to boost production capacity by 25 percent to 40 percent over the next two years. GM said today it expects to remain a “key pillar” of the Chinese automobile industry.

Ford is “strongly committed” to China, it said in an e- mail.

--Liza Lin. Editors: Young-Sam Cho, Suresh Seshadri

To contact Bloomberg News staff for this story: Liza Lin in Shanghai at llin15@bloomberg.net

To contact the editor responsible for this story: Young-Sam Cho at ycho2@bloomberg.net


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