The European Union and China have reached an understanding that caps imports of hybrid and plug-in hybrid cars into the European bloc at 350,000 units a year. The measure, announced in Beijing by EU Trade Commissioner Maroš Šefčovič, is due to take effect on 1 December and to run for four years, with the ceiling rising 6% a year from the second.
Šefčovič and Chinese Commerce Minister Wang Wentao met in Beijing on 8 and 9 October and closed 16 points of understanding, covering trade and investment, export controls and intellectual property.
The cap applies to everyone, not only China
Because of the non-discrimination rule at the World Trade Organization (WTO), the ceiling is an import safeguard that applies to hybrids from any origin — including countries with a free-trade agreement with the bloc — and not only to those built in China. Both sides committed to respecting WTO rules.
In Šefčovič's own terms, the practical effect is to cut by more than half, over four years, the Chinese exports projected in a no-deal scenario — the equivalent, he said, of "several million" vehicles that would not be shipped. The caveat matters: the reduction is measured against projected growth, not against today's volume.
Why hybrids are the target
In 2024, the bloc imposed countervailing duties of up to 35.3% on fully electric cars made in China. Hybrids and plug-in hybrids were left outside that duty — and that is exactly where Chinese carmakers redirected their exports.
The numbers show how fast the shift was. Chinese brands went from about 2% of the European hybrid market in 2024 to 14% in the first half of 2026, and to 25% in the plug-in segment, according to industry data cited by the European press. By July 2026, Chinese hybrid shipments to Europe were running at around 50,000 units a month.
Rare earths through a "green channel"
In parallel, China committed to continue easing export licensing for rare earths and permanent magnets bound for the bloc through a fast-track channel, to give European factories more predictability. The European Union, for its part, will work with member states on priority licences for dual-use goods headed to China.
The two sides also agreed on advance notice and greater transparency whenever items are added to or removed from their respective export-control lists — the point that most worries European industry, which depends on Chinese magnets for electric motors and defence equipment.
Tariffs: car parts, olive oil and footwear
China will look at lowering most-favoured-nation tariffs on European products such as car parts, olive oil and footwear. The European Union estimates the list currently accounts for almost €4 billion in exports and at least €225 million in duty savings.
That is modest against the imbalance the bloc wants to correct: the European goods trade deficit with China reached €103 billion in the second quarter of 2026, its highest since the third quarter of 2022.
Beijing cuts the VAT rebate on electric vehicles
On the same 12 October, China's Ministry of Finance and State Taxation Administration announced, in a joint statement, a cut in the VAT export rebate for new energy vehicles from 13% to 9%, effective 1 April 2027. The category covers battery electric and plug-in hybrid vehicles.
The measure is a domestic Chinese decision, not part of the deal with the Europeans, and it points the same way: making the exported car marginally more expensive and, according to analysts cited by the Chinese press, cooling the price war among the country's carmakers.
What is still missing
Šefčovič called the outcome "a crucial first step – but only a first step" in the rebalancing process, and said that "where dialogue cannot deliver, the European Union will use its tools".
The final word belongs to heads of state and government: the European Council meets on 15 and 16 October in Brussels to assess whether the package actually starts the rebalancing. The European carmakers' association (ACEA) welcomed the hybrid understanding but noted that buses and trucks remain unresolved; Germany's VDA was more cautious, saying the effect depends on implementation details.
With information from Bloomberg, Reuters, Xinhua and the Seoul Economic Daily.
