EU Plans Measures to Halve Imports of Chinese Hybrid Cars

The European Union intends to use safeguard measures to cut the number of hybrid car imports from China by half, according to people familiar with the discussions.

The EU’s chief trade negotiator, Maros Sefcovic, briefed European officials that the mechanism to curb imports still needs to be discussed with the bloc’s leaders next week, but that they would likely use safeguards, said the people, who spoke on the condition of anonymity.

If agreed, the measures could be implemented by December, according to one of the people.

Safeguard measures typically take the form of tariff-rate quotas, which apply a levy on imports above a certain volume to curb excess flows. That would comply with World Trade Organization rules, and both China and the EU have said that’s a requirement.

Sefcovic told the officials that the action would cut the flow of hybrids into the EU to about 400,000 per year, from around 800,000 expected in 2026, the person said. Bloomberg reported earlier that the EU was preparing safeguard measures on hybrids.

A spokesperson from the European Commission, which handles trade matters for the EU, declined to comment.

Chinese carmakers like Chery Automobile Co. have massively stepped up vehicle shipments to the EU in response to a slump in their home market, exacerbating a deceleration plaguing European peers, which are among the worst-performing globally. Mercedes-Benz Group AG car sales dropped by 8% in the third quarter, while Volkswagen AG last month slashed its profit forecast following a similar warning from BMW AG in June.

Sefcovic met with Chinese Commerce Minister Wang Wentao in Beijing this past week to discuss the situation, before issuing a joint statement saying they had reached an “understanding on trade in hybrid vehicles in a WTO compliant manner.” The EU trade chief will brief the bloc’s ambassadors on Sunday, then EU leaders will meet in Brussels Thursday and Friday to discuss the next steps.

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Europe’s car lobby group ACEA on Friday welcomed the announcement of an interim deal. “A sharp and sudden destabilization 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,” ACEA’s Director-General Sigrid de Vries said in a statement.

Surging Chinese hybrid car sales have become a symbol of Europe’s frustration with Beijing — but it’s a fraction of the overall issue. EU leaders are anxious about a trade deficit that exceeds €1 billion ($1.1 billion) a day and they’re seeking ways to stop China from flooding the continent with subsidized, low-cost goods that erode local industry.

“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.”

The deal will span the next four years, Sefcovic said, but neither side offered details of how they will moderate hybrid exports. He added that he would meet Wang by January before another set of talks in March.

In a statement, the Chinese Ministry of Commerce said the two sides had “reaffirmed their commitment as key trading partners to properly managing differences under WTO rules, maintaining stable bilateral economic and trade ties and making them more balanced.”

Chinese hybrid car sales have escalated in part because they escaped the EU’s 2024 tariffs on electric vehicles. In August, Chinese-made cars accounted for about a quarter of European hybrid sales.

The EU plans to use hybrids as a test case, which, if successful, could be replicated with other sectors where the bloc sees trade imbalances, Bloomberg reported earlier this week.

Ahead of this week’s talks, France and Germany called on the EU to significantly expand its retaliatory economic powers — suggesting it should even consider severing trade ties with bad actors that launch trade wars. Europe’s two largest economies also want the EU to investigate whether subsidized imports are harming sectors like chemicals and plastics — probes that could produce more tariffs.

The proposal was seen as a pressure tactic targeting Beijing, putting Germany’s weight behind forceful moves it had previously opposed.

The toughening stance reflects Europe’s growing awareness that its trade deficit with China, which reached €360 billion last year, is crippling local industry. At the same time, however, China is increasingly relying on those exports to support its own growth.

“I came here with one clear purpose: to start rebalancing the EU-China trade relationship,” Sefcovic said.