China and the European Union (EU) have reached an agreement aimed at reducing Chinese hybrid and plug-in hybrid vehicle exports to Europe by more than half over the next four years.
European Trade Commissioner Maroš Šefčovič announced the development on Friday following two days of discussions with Chinese officials in Beijing.
According to Šefčovič, the agreement is expected to reduce the number of Chinese hybrid vehicles entering the European market by several million over the four-year period. However, both sides have yet to provide detailed information on how the arrangement will be implemented.
The agreement is part of broader efforts to address the growing trade imbalance between China and the EU, which has raised concerns among European governments about the competitiveness of their domestic industries.
Šefčovič described the outcome as a significant achievement but stressed that more work was needed to restore balance to trade relations between the two economic powers.
European car manufacturers welcomed the announcement, with shares of several major automakers rising following the news.
China, EU Agree on Wider Trade Measures
Beyond the automotive sector, China and the EU reached an understanding on improving market access for European products worth approximately €4 billion.
The products include car parts, olive oil and footwear. China also agreed to facilitate the approval of export licences for rare earth elements and permanent magnets through a special mechanism designed to speed up the process.
These materials are essential to several industries, including electric vehicle manufacturing, electronics and renewable energy.
The two sides also agreed to continue discussions on alternative arrangements to tariffs, including minimum-price commitments for imported vehicles.
European officials are expected to review the agreement at an upcoming EU summit in Brussels to determine whether it represents meaningful progress towards reducing the bloc's trade deficit with China.
Rising Chinese Car Imports Raise Concerns
European governments have become increasingly concerned about the rapid growth of Chinese vehicle imports as domestic manufacturers face declining competitiveness and job losses.
Imports of plug-in hybrid vehicles into the EU rose by 86 per cent in the year to September 2026, while prices fell by 20 per cent, according to figures cited in the report.
More than half of the bloc's plug-in hybrid imports now come from China, highlighting the growing influence of Chinese manufacturers in the European automotive market.
The dispute follows the EU's introduction of tariffs on Chinese electric vehicles in 2024. Since then, trade tensions have expanded to include Chinese measures affecting European brandy, pork and dairy products, as well as restrictions on exports of rare earth elements and other critical minerals.
Germany and France are among the European countries significantly affected by the broader trade dispute.
The German automotive industry cautiously welcomed the new understanding, although industry representatives said it was too early to determine whether the agreement would address concerns about unfair competition.
Trade Imbalance Remains a Major Challenge
The growing trade imbalance remains at the centre of tensions between Beijing and Brussels.
China's exports to the EU reached approximately $560 billion in 2025, up from $517 billion in 2024. Meanwhile, Chinese imports of European goods fell slightly to $268.3 billion from $269.4 billion over the same period.
European Commission President Ursula von der Leyen has previously warned that the widening trade gap had reached a critical point, pledging to use available measures to rebalance economic relations.
China, however, has argued that it should be viewed as a partner in addressing Europe's economic challenges rather than the source of the bloc's problems.
Both sides have agreed to continue discussions on tariffs, market access and trade in medical devices.
Šefčovič and Chinese Commerce Minister Wang Wentao are expected to meet again in March 2027, following a planned video conference in January.
The latest agreement marks an important step in efforts to ease trade tensions between China and the European Union, although its effectiveness will depend on how the commitments are implemented.Source: Reuters, October 9, 2026.
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