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China Ends Limit on Foreign Car Makers' Ownership Stakes

Currently, foreign automakers need to enter joint ventures with Chinese partners and face a 50% ownership-stake limit.
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China said on Monday that it’s ending its limits on foreign automakers’ investments in the country as of Jan. 1.

Currently, foreign automakers need to enter joint ventures with Chinese partners and face a 50% ownership limit in those agreements.

China has been opening its auto industry to foreigners gradually over the past three years, Nikkei reports

Initially, it released the spigot for electric vehicles and then for commercial vehicles last year. Now the passenger-vehicle segment, which makes up 80% of the market, is opening up.

General Motors  (GM) - Get General Motors Company Report is one of the major foreign players in China, delivering 2.9 million vehicles there last year through its joint ventures.

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GM recently traded at $57.42, up 0.9%. Morningstar analyst David Whiston likes the stock, putting fair value at $68.

“We think General Motors' vehicles are of the best quality and design in decades,” he wrote in October. 

“The company is already a leader in trucks, so a competitive lineup in all segments, combined with a much smaller cost base, says to us that GM is starting to realize the scale to match its size.

“The head of Consumer Reports automotive testing even said Toyota and Honda could learn from the Chevrolet Malibu.

“We think GM's earnings potential is excellent because the company has a healthy North American unit and a nearly mature finance arm with GM Financial.

“Moving hourly workers' retiree healthcare to a separate fund and closing plants have drastically lowered GM North America's break-even point to U.S. industry sales of about 10 million-11 million vehicles, assuming 18%-19% share.”