China, EU strike deal to cut Chinese hybrid vehicle exports by over half

By Joe Cash

BEIJING, Oct 9 (Reuters) - China and the European Union have reached a deal that could cut Chinese exports of hybrid and plug-in hybrid cars to the bloc by more than half, European Trade Commissioner Maros Sefcovic said on Friday in Beijing following talks aimed at reducing the EU's huge trade deficit.

The "shared understanding" would "moderate" China's export of hybrids and plug-in hybrids to the EU, and would cut the imports of several million cars over four years, Sefcovic said, without detailing how the agreement will be implemented.  

The understanding came after two days of discussions between Sefcovic and Chinese officials including Commerce Minister Wang Wentao, and followed years of disputes between Beijing and Brussels involving China's ballooning goods shipments, especially cars.  

"I came here with one clear purpose: to start rebalancing the EU china trade relationship and to make sure this first phase of negotiations under the trade and investment consultations delivers its first tangible outcomes," Sefcovic told a press briefing. 

The European Union's trade deficit with China cost the bloc over €1 billion ($1.12 billion) a day last year, according to EU data.

Chinese Commerce Minister Wang told Sefcovic that China was not the root cause of the EU's problems, but a partner in solving them, according to the Chinese ministry,.

The two sides also reached understandings for improving EU products' access to Chinese markets and facilitating China's export licensing for rare earths and permanent magnets, Sefcovic said. 

CHINESE CAR IMPORTS TO EU HAVE RISEN SHARPLY

EU officials are concerned by the sharp rise in car imports from China. Imports of plug-in hybrids into the EU increased 86% in the year to September, with a 20% decline in prices. More than half of these vehicles are now from China, while for 2025, China's share of plug-in hybrid electric vehicle imports was 30% in value terms.

China and the EU also agreed to continue discussions on price undertakings and review procedures related to the EU's anti-subsidy investigation into Chinese electric vehicles, according to a joint statement. 

China and the EU's dispute over cheap Chinese EV exports, dating back to 2024, has clouded bilateral ties, and has since broadened to include sectors such as brandy, pork and dairy, as well as rare earths and critical minerals.

Paris and Berlin are among the hardest hit by Beijing's trade curbs, with France accounting for 90% of EU brandy exports to China and Germany heavily exposed in dairy.

As part of the consensus reached in the trade talks, China's commerce ministry said it would continue facilitating the approval of export licenses for rare earths and permanent magnets through a "green channel" mechanism.

TRADE IMBALANCE AT HEART OF DISPUTE

Chinese shipments to the EU totalled $560 billion last year, according to UN Comtrade data, up from $517 billion in 2024, as exports to major economies including Germany, Italy, Spain and Poland each rose about 10% from a year earlier, while shipments to Hungary jumped 43%.

Meanwhile, China took $268.3 billion worth of European goods last year, down from $269.4 billion a year prior, led by purchases from Denmark, Ireland and France.

China needs foreign buyers for the flood of state-subsidised goods its own shoppers can't absorb, and the EU is torn between welcoming those imports to ease living costs and keeping them out to rebuild its own factories.

European Commission President Ursula von der Leyen warned the European Parliament last month that the trade gap had reached a tipping point and that the 27-member bloc would use all the tools at its disposal to rebalance the relationship.

China and the EU will keep exploring the possibility of lowering tariffs on certain goods within the framework of WTO rules, and continue their dialogue on market access for medical devices, the Chinese ministry said. 

A third regular meeting of their consultation mechanism will take place in March 2027, and the two sides agreed to maintain communication, including a ministerial-level video conference in January, the joint statement said.

($1 = 0.8920 euros)

(Reporting by Joe Cash, Yukun Zhang and Qiaoyi Li in Beijing; additional reporting by Philip Blenkinsop in Brussels; editing by Philippa Fletcher and Susan Fenton)