EU Plans to Cap Chinese Hybrid Car Imports to Narrow Trade Gap

The European Union is drawing up temporary restrictions on Chinese hybrid car imports, targeting a surge in sales as Brussels seeks to narrow its trade deficit with Beijing.

The European Commission could deploy safeguard measures against the vehicles, according to people briefed on the discussions.

The plans remain subject to change, including after trade talks in China later this week.

Chinese brands captured a quarter of European hybrid sales in August and a third of the plug-in hybrid market.

Their share of all new-car sales reached a record of nearly 12%.

Quotas Under Consideration

One option would be tariff-rate quotas, under which imports exceeding a specified volume would incur additional duties.

Any proposed cap would operate for a limited period, the people said.

Hybrids currently escape the elevated EU duties applied to Chinese electric vehicles.

Growth in electric vehicle imports has slowed, while hybrids have expanded their foothold.

Brussels intends to use the hybrid sector to test an approach that could subsequently extend to other industries with trade imbalances.

Officials also want to calibrate the restrictions to reduce the risk of retaliation from Beijing.

European automaker shares climbed on the report. Renault gained as much as 6.1%, Volkswagen 4.6% and Mercedes-Benz 2%.

Beijing Talks Could Alter Plans

EU trade chief Maros Sefcovic is due in Beijing later this week to meet Chinese Commerce Minister Wang Wentao.

The outcome could influence whether and how Brussels proceeds with the hybrid restrictions.

China has signaled willingness to discuss greater investment and purchases from Europe.

It has shown less appetite for measures restraining its exports, according to the people.

Beijing previously rejected discussion of voluntary limits on hybrid shipments.

“These so-called voluntary export restrictions seriously violate WTO rules and run counter to the laws of the market economy and the principle of fair competition. China firmly opposes this,” a Commerce Ministry spokesperson said last month.

EU ambassadors are scheduled to receive a briefing on the talks on Sunday.

Wider Push on Trade Imbalances

The EU’s trade deficit with China amounts to more than €1 billion a day.

Leaders will discuss possible additional trade instruments at a summit in mid-October, while the Commission is expected to present measures to address the imbalance and diversify supply chains before year-end.

Brussels set an October deadline for concrete progress in negotiations launched earlier this year.

Its demands include fewer barriers to the Chinese market and relief from restrictions affecting brandy, pork and dairy products.

The bloc is also seeking faster approvals for critical raw material supplies.

China, meanwhile, wants the EU to ease export controls, a demand the Commission says falls within member states’ authority.

France and Germany proposed another instrument this week that could limit access to the EU’s single market during a trade war.

They also urged investigations into strategically important industries, including chemicals.