China agrees to cap EU hybrid car imports amid broader trade tensions

The EU and China have negotiated a provisional cap on Chinese hybrid and plug-in hybrid vehicle shipments, setting an initial limit of 350,000 units per year and a 6 % annual increase beginning in 2028. European officials estimate the quota could cut Chinese exports by over 50 % relative to projected 2026 volumes, though Beijing portrays the deal as preserving growth from its 2025 baseline. The concession comes after the EU imposed duties on pure electric cars in 2024, prompting Chinese firms to shift to hybrids to sidestep tariffs.

While China has not altered its industrial policies or acknowledged overcapacity, it accepted limits in the automotive sector to forestall a broader confrontation. The agreement also includes steps to ease export licensing for rare earths and magnets, but China retains control over the licensing system. Chinese automakers such as BYD are planning factories in Hungary and exploring sites in France and Spain, while Leapmotor seeks assembly partnerships with Stellantis, signaling a shift toward local production.