EU proposes 350,000-vehicle annual cap on Chinese hybrid imports

The European Union is moving to restrict the inflow of hybrid vehicles from China with a proposed safeguard that could begin as early as Dec. 1. The plan limits hybrid imports tied to China to 350,000 vehicles in the first year. From the second year onward, the cap would increase by 6% annually. The measure is intended to remain in place for four years, with both sides pledging to follow World Trade Organization rules during that period.

Structure of the Import Cap

To comply with WTO non-discrimination rules, the restriction is structured to cover all hybrid imports, not only those built in China. Under this approach, China's allowance cannot be smaller than the quota granted to any other import source. The measure includes countries that have free-trade deals with the EU.

Carve-outs would apply to European Economic Area countries, as well as Ukraine, Kenya, and developing WTO members that account for a small slice of imports. It is not specified whether volumes beyond the quotas would face extra duties or whether the limit functions as a hard stop. A European Commission spokesperson did not immediately provide comment.

Trade Measures and Tariff Reductions

Alongside the cap, China plans to remove certain tariffs on automotive parts and temporarily cut duties in half on items such as shoes, ice-cream and olive oil. These steps would cover about €4 billion in exports. Brussels and Beijing also intend to look at simplifying export controls and licenses, with a focus on supplies of rare earths and permanent magnets.

EU trade chief Maros Sefcovic met with Commerce Minister Wang Wentao in Beijing over the past week. The bloc aims to reduce a daily trade shortfall exceeding €1 billion ($1.1 billion). "The trade deficit is a mountain of a challenge for the EU, felt in every member state. It is unsustainable and it demands a credible path to rebalancing," Sefcovic told reporters in Beijing Friday.

"We must defend our industries and restore a level playing field that has been distorted by global overcapacity," Sefcovic said. EU ambassadors who received a briefing from Sefcovic were largely positive on the outcome but emphasized it is only an initial step toward rebalancing, according to people familiar with the discussions.

Market Context and Industry Reaction

Imports of vehicles from China into the EU climbed by nearly three quarters through August this year. In the same month, Chinese-built cars represented roughly one in four hybrid purchases in Europe. Chinese hybrid sales have been buoyed in part because they were not caught by the EU's tariffs on electric vehicles that took effect in 2024. Dataforce notes that BYD set a new high for European market share in August.

The Stellantis-Leapmotor joint venture views the proposed deal as an "interesting alternative to tariffs," its CEO Danilo Annese said on Monday at the Paris Auto Show. Leapmotor International will comply with any deal the EU and China reach, although details will need to be clarified in coming months, Annese said.

Annese added that market demand for EVs in Europe is gaining more traction than expected a year ago, with increasing demand in countries such as Italy and Spain. Discussions are ongoing with Stellantis over possible locations for future Leapmotor manufacturing sites in Europe, including a plant in Madrid.

Why it matters

The proposed cap addresses a growing trade imbalance, with Europe's trade deficit with China hitting €360 billion last year. Chinese manufacturers, including Chery Automobile Co., have accelerated deliveries to Europe as their domestic market cooled, piling pressure on European incumbents. Mercedes-Benz Group AG reported an 8% drop in third-quarter car sales, Volkswagen AG cut its profit outlook last month, and BMW AG issued a profit warning in June. EU leaders will meet in Brussels on Thursday to discuss the hybrid cap and wider steps to stem imports of subsidized, lower-priced goods.

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Sources

• briefs.co: EU caps Chinese hybrid car imports at 350,000
• auto.economictimes.indiatimes.com: Stellantis and Leapmotor Explore EU-China Hybrid Vehicle Import Cap, ETAuto
• centraloregondaily.com: Leapmotor-Stellantis JV calls EU-China import cap deal 'interesting alternative' | Consumer | centraloregondaily.com

This article was drafted with AI assistance and checked against the sources above. Company claims are reported as claims. Cover image is AI-generated.