China Tells Automakers to Hand Over Intellectual Property

Chinese Automaker Huatai version of the Bentley Continental Flying Spur

The Chinese market is now the fastest growing automotive market in the world, and the Chinese government knows this. Unlike many industrialized nations who don't require companies to build anything, just 50 years ago Britain was the second largest manufacturer of cars, and the US was far ahead. But the world has shifted east and China is posed to make all the rules.

China is reportedly set to change requirements for automakers that wish to update any contracts in an effort to build more vehicles in China. According to the Financial Times, as much as 30 percent of any additional production capacity over what has already been agreed upon will be earmarked for the Chinese market, and that percentage of vehicles would have to be sold under a new low cost Chinese brand name.

China is not looking to expand the number of brands sold in China, but is using these new regulations as a backdoor to access the intellectual property of foreign car makers. "During 10 years of trying, China has become a big factory for foreign companies, and their Chinese partners didn't get advanced technology. Through this industrial policy they would like Chinese carmakers to get IP in order to own this market," said Lang Xuehong, automotive analyst with Sinotrust, quoted by Financial Times.

Automakers will have to decide if trading off their companies intellectual property to partners that are mostly controlled or owned by the Communist government is worth the access to this emerging market. Companies like BMW, Mercedes, and even the premium brand Bentley have all fought Chinese automakers over knockoff models, with little success.

[Source: Financial Times – sub. req.]