Curb hybrid car exports

EU and China clinch deal to curb hybrid car exports

Trade Commissioner Maroš Šefčovič says the agreement could prevent millions of Chinese vehicles from entering the European market over the next four years.

By Carlo Martuscelli and Camille Gijs

The European Union and China reached an agreement on Friday that will curb China’s booming hybrid car exports, delivering a breakthrough in negotiations aimed at rebalancing their trade relationship.

The announcement came as Trade Commissioner Maroš Šefčovič wrapped up two days of talks in Beijing, the culmination of a push launched in June to narrow the bloc’s €1 billion-a-day trade deficit with China. 

The deal marks a win for the EU executive, which has been under pressure to secure concessions from Beijing. Going into the talks, France and Germany strengthened Šefčovič’s hand by calling for the EU to take tough action on trade if China failed to curb a growing export glut.

Speaking in Beijing, the commissioner said the two sides had reached an agreement that would help to shield European automakers from low-price Chinese competition. He declined to enter into specifics before EU leaders officially mandate the EU executive to move forward. 

“We have reached a shared understanding to moderate China’s export of hybrids and plug-in hybrids to the European Union. This opens the prospect of cutting China’s exports by more than a half,” Šefčovič told reporters. 

The estimate was based on projections of how Chinese exports would grow over the next four years without the agreement. In practical terms, it would mean that “several millions of car exports from China to the European Union” would be prevented, he explained.

China’s Commerce Ministry highlighted the understanding on hybrids in a parallel 16-point statement, but offered no details on how exports would be restrained. It said the two sides “will continue to strengthen communication and cooperation under the trade monitoring mechanism and further leverage dialogue mechanisms to enhance mutual understanding.” 

Šefčovič declined to elaborate when asked whether the deal would allow the EU to impose safeguards — a mixture of import quotas and tariffs — a step that Brussels has been considering. He said the arrangement would comply with the rules of the World Trade Organization.

First step

Šefčovič said that Beijing had also agreed to lower duties on European goods worth €4 billion, ranging from olive oil to footwear, a move that would save exporters €225 million. 

“It is a crucial first step,” he said. “But only a first step in the process of rebalancing.” 

The Slovak commissioner said he would report back to European Commission President Ursula von der Leyen, along with EU leaders, when they meet for a summit in Brussels next Thursday.

He had focused on cars as a key deliverable going into meetings in Beijing with Commerce Minister Wang Wentao and Vice Prime Minister He Lifeng.

Chinese auto exports to Europe have been booming, accounting in August for one in eight cars sold in the bloc — mainly driven by sales of hybrids. Europe’s own automotive industry is feeling the pressure, with Volkswagen and Mercedes-Benz recently announcing job cuts and plant closures.

Aside from the deal on hybrids, Beijing said in its statement that it was “willing to continue” fast-tracking licenses to export rare earth elements to the EU. Automakers had been forced to shut down assembly lines after China temporarily restricted exports in response to U.S. tariffs last year. China dominates the production and processing of rare earths.

“We have reached a shared understanding to further facilitate China’s export licensing for rare earths and permanent magnets,” Šefčovič said. 

Road ahead

Brussels sees the agreement on hybrid electric vehicles as a blueprint that could be replicated to shield further EU sectors currently under strain, such as chemicals or machinery. The two sides plan to meet again in March 2027, and will hold a video call in January. 

The agreement on one of the EU’s top negotiating targets significantly reduces the risk of an escalation in trade tensions that could have led to a tit-for-tat round of retaliation. It remains to be seen whether the EU will act swiftly on the Franco-German call to empower Brussels to shut out exports from countries that destabilize its single market.

“Public opinion and the leaders clearly expect very fast action from our side. I am glad to say that the Chinese partners appreciated this very strong political argument, and therefore, we can proceed through the negotiated solution,” said Šefčovič.

Other areas of agreement include exploring easier market access for European medical devices, as well as promises by Beijing to scale back sweeping disease-control measures that have restricted European meat and livestock exports. 

While the deal will cool the most immediate tensions, a wider resolution to the economic imbalances that fueled the conflict remains distant. The EU’s trade deficit with China totaled nearly €360 billion in 2025, and is already up 12 percent so far this year.  

China’s automotive exports to the EU, which totaled €15.1 billion last year, are only a fraction of that.