The European Union has reached a provisional deal to limit imports of hybrids built in China, following a sharp rise in Chinese-made hybrid and plug-in hybrid sales across the region. The proposal still requires approval from EU member states.

The measure follows the EU’s earlier tariffs on Chinese electric vehicles, which reportedly encouraged affected automakers to place greater emphasis on hybrid exports. Under the latest arrangement, the number of Chinese hybrids entering the European market would be reduced substantially over the next four years.

Quota figures remain subject to final details

Bloomberg reports that the quota could be set at 350,000 vehicles in 2027, followed by annual increases of 6%. That figure would represent a significant reduction from the as many as 800,000 Chinese hybrids expected to reach the EU this year.

However, the Financial Times reports that the quota for next year could instead fall between 500,000 and 700,000 vehicles. The differing figures indicate that important details of the arrangement have not yet been finalized or publicly confirmed.

Without an import limit, Chinese automakers were reportedly on track to capture a majority of hybrid and plug-in hybrid sales in the region. Chinese vehicles represented 25% of European plug-in hybrid sales during the first half of this year, compared with 2% in 2024. Their share of total hybrid sales reached 14%, also up from 2%.

Trade tensions and European manufacturers

EU and Chinese officials negotiated the agreement late last week as they sought to avoid a broader trade conflict. China has reportedly agreed not to retaliate against EU imports in response to the quota.

EU officials believe the arrangement could reduce the bloc’s trade deficit with China by between €10 billion and €14 billion. It is also intended to provide relief for European automakers facing stronger competition from Chinese electric and hybrid vehicles.

The increased presence of Chinese brands has added pressure to manufacturers including Volkswagen, which plans to cut 100,000 jobs in the coming years while working to restore its competitiveness.

European production could avoid the quota

The proposed restriction appears to apply to hybrids exported from China rather than vehicles produced by Chinese companies at factories within Europe. That distinction could give automakers a way to maintain regional sales by expanding local manufacturing.

BYD has already established a plant in Hungary. Dongfeng, Chery, Geely, and Leapmotor are also working to build vehicles in Europe, according to the source. Hybrids produced at those facilities may not be covered by the import quota, although the final terms of the agreement remain subject to approval.