After the Chinese government rejects voluntary export limits on hybrid cars to the EU, the European Commission is reportedly considering a quota combined with tariffs to achieve this.
Rather than imposing blanket tariffs, Bloomberg sources indicate tariffs could be imposed on cars when their volume exceeds a certain level, creating a trade imbalance.
After previously denying similar plans, the strategy will be one of the important topics at the European Summit in October. Although no decision has been made yet, new measures could signal a new approach to China. And it could be a test case for other sectors.
Soaring hybrid imports
The European car market is facing a massive influx of Chinese hybrid and plug-in hybrid cars. And EU leaders aren’t happy about the situation, fearing unfair competition from locally built cars.
Over the past two years, imports of Chinese hybrids have soared. Roughly one in three PHEVs registered in Europe was made in the country, and Chinese brands accounted for 12% of the market in August of this year. European customers seem to love affordable PHEV’s and range-extended hybrids with a big battery, which Chinese brands specialize in.
The share of plug-in hybrids has risen sharply since the EU imposed tariffs on Chinese electric vehicles in 2024. It did so because its own research showed signs of unfair competition due to massive state support, leading to dumping practices.
Exploring viable options
The EU tried negotiating with the Chinese government to get it to limit the exports of (plug-in) hybrids voluntarily. But the response was negative. The Chinese Ministry of Commerce said this would “seriously violate WTO rules”.
So now, the EU is exploring other options to limit hybrid imports. But since the research into Chinese state support only involved electric cars, the existing EV tariffs can’t just be extended to (plug-in) hybrids.
The solution could be tariffs on PHEVs when a certain threshold is exceeded, creating a trade imbalance. But the EU needs to tread carefully. Imposing tariffs on imports from another country could go against WTO rules. And cause China to take countermeasures.
Risks
Quota tariffs on PHEVs could mean a price increase for European buyers, at a time when the EU wants to electrify its fleet to limit emissions.
And since the EU is violating international trade rules by singling out China and imposing overly broad tariffs, it might also cause prices of imports from other countries to rise. Japan and South Korea, for instance.
While the EU is trying to protect its local production against what it calls dumping practices, tariffs might lead to more investments in Chinese production in the EU.
When will measures take effect?
The EU hasn’t communicated on a plan of action yet, while searching for an appropriate solution. Over the next few days, it is in negotiations with China.
These will form the basis for discussions with EU leaders during the European Summit on October 15 and 16, leading to EU Commission proposals later this year. If it comes to measures, they will likely take effect in 2027.
If the EU finds a solution in accordance with international trade law, this could serve as a basis for a new approach to Chinese imports in other sectors.
