The European Union and China have reached a preliminary agreement to impose strict limits on the import of Chinese hybrid and plug-in hybrid vehicles entering Europe. The EU plans to cap the annual import of Chinese hybrid cars at 350,000 units starting this December. Economist Michael Pettis has warned that this agreement may not bring significant benefits to the entire European manufacturing sector.
Kathmandu, October 15 – Facing a crisis in European markets and industries caused by China’s industrial overcapacity and rapid exports, the European Union has adopted a new strategy. Instead of following the high tariff policies like those of former U.S. President Donald Trump, Europe has decided to mitigate the effects of ‘China Shock 2.0’ by imposing definite import quotas on Chinese vehicles. As part of this approach, the EU and China have reached an initial understanding to set strict limits on the import of Chinese hybrid and plug-in hybrid vehicles into Europe.
After the EU imposed heavy tariffs on fully electric vehicles from 2024, Chinese automakers increased their exports of hybrid vehicles, prompting the new agreement to control this surge. The EU plans to enforce the annual cap of 350,000 Chinese hybrid vehicle imports starting in December. This number represents a reduction of more than half compared to this year’s projected import of 800,000 Chinese hybrid vehicles. In 2025, a total of 302,000 hybrid vehicles were imported into Europe. Any imports exceeding the quota will be blocked outright, without additional tariff measures.
The policy shift in Europe and the challenge of ‘China Shock 2.0’ have raised serious concerns among European leaders as China’s excess production, which its internal economy cannot absorb, floods external markets. Ursula von der Leyen, President of the European Commission, warned in her annual address that the trade deficit with China has reached a ‘tipping point,’ stating, “Some say the second Chinese trade shock is coming, but it is already here.” Even traditionally pro-free trade countries like Germany and France have proposed granting Brussels broader powers to prevent unfair trade practices.
Germany’s change in stance, which previously opposed tariffs on Chinese electric vehicles in 2024, is considered a significant political shift. Although the agreement’s limited impact and economists’ concerns suggest that the EU’s measures may provide some relief to European car manufacturers, they likely will not fully protect the entire European manufacturing sector. In September, Chinese automakers’ global car exports surged 64% to 919,000 units, even as domestic sales in China dropped 27%. Imposing quotas may shift production pressures onto other industries or countries. Renowned economist Michael Pettis commented that the deal offers little overall benefit to Europe’s manufacturing base, saying, “European hybrid vehicle producers may find some relief, but it will come at the expense of other European producers.”
