EU and China reach deal to cut hybrid car imports by more than half

The European Union and China have reached an interim agreement that could reduce Chinese exports of hybrid and plug-in hybrid vehicles to Europe by more than half over the next four years, in a move aimed at easing trade tensions and protecting European automotive manufacturing.

The agreement, announced on 9 October following negotiations in Beijing, could result in several million fewer Chinese hybrid vehicles entering the EU market.

European Trade Commissioner Maroš Šefčovič described the agreement as a significant breakthrough following months of negotiations aimed at addressing the EU’s widening trade deficit with China and concerns about the rapid growth of Chinese vehicle imports.

The deal establishes a shared understanding between the two sides to moderate Chinese exports of hybrid electric vehicles (HEVs) and plug-in hybrid electric vehicles (PHEVs), although details of how the reductions will be implemented have yet to be confirmed.

The discussions form part of a wider 16-point agreement covering trade imbalances, improved access for European products to the Chinese market and continued negotiations over export restrictions on rare earth materials.

China has also indicated that it will continue facilitating export licences for rare earths and magnets, which are important components in automotive manufacturing and electrification.

The European Automobile Manufacturers’ Association (ACEA) welcomed the announcement, describing it as a positive step towards easing trade tensions and addressing market disruption caused by rapidly increasing Chinese vehicle imports.

According to ACEA, Chinese brands accounted for 14% of Europe’s hybrid electric vehicle market in the first half of 2026, compared with just 2% in 2024.

Their share of the plug-in hybrid market increased even more sharply, rising from 2% in 2024 to 25% in the first six months of 2026.

The association warned that the rapid expansion of Chinese manufacturers, combined with intense price competition, was placing increasing pressure on European automotive businesses.

“A sharp and sudden destabilisation of the market in Europe, along with price wars that mirror the current market situation in China, would be highly disruptive to the European economy as whole.

“Today’s announcement can help facilitate the transition to a new era of Chinese presence in the European market in an orderly way and this is in the long-term interests of all parties.”

ACEA stressed that European vehicle manufacturing had benefited from decades of open and fair competition but argued that the speed and scale of the recent increase in Chinese hybrid imports required attention.

Despite welcoming the agreement, ACEA cautioned that further work would be needed to address potential disruption in other vehicle segments, including buses and trucks.

Šefčovič also acknowledged that the agreement represented an initial step rather than a comprehensive resolution of trade tensions between the EU and China.

“This is far from the end. It’s a crucial first step, but only a first step,” he said.

The two sides are expected to continue discussions on automotive trade, market access and critical materials, with the implementation of the hybrid vehicle agreement likely to be closely watched by European manufacturers.