China's agreement with the European Union to cut hybrid vehicle exports by more than half has drawn attention to what lies behind the deal. Analysts say Beijing has secured practical gains, having expanded local production in Europe that falls outside export tallies while using the agreement to head off further EU trade measures.
China's Ministry of Commerce said in an explanatory statement on the 13th that EU imports of Chinese-made hybrid vehicles totaled 107,000 units in 2024 and rose to 302,000 units in 2025, citing Eurostat data. "The two sides agreed on a plan to expand volumes based on 2025 levels, ensuring export capacity and stable growth for Chinese companies," the ministry said.
That differs subtly from the EU's own account. Bloomberg reported that the EU had agreed with China to cap imports of Chinese hybrid vehicles at 350,000 units a year starting next year, with the ceiling rising 6% annually from the second year of implementation. The EU stressed that the deal would cut imports of Chinese hybrid vehicles by more than half. The two accounts diverge because each uses a different baseline. The EU highlighted the reduction against this year's projected imports of 800,000 units, while China emphasized that volumes would actually increase from last year's level.
Despite the conflicting interpretations, analysts say the 350,000-unit annual cap will inflict little damage on China, which has been rapidly expanding production bases inside the EU to bypass trade barriers. BYD is reviewing additional plants in France and Spain following its Hungary facility, while Chery, Geely, Hongqi, Leapmotor and Xpeng are also expanding production capacity across Europe. Chinese parts suppliers located near those assembly plants are likewise building up local production and distribution networks. Chinese brands accounted for about a third of the more than 60 manufacturers at the Paris Motor Show, which opened the previous day, underscoring how they have captured the European market on price competitiveness.
Some argue the agreement could backfire on the EU, weakening the bloc's justification for measures such as restricting China's access to the European market, a step pushed by France and Germany. The deal also falls far short of addressing the EU's trade deficit with China. The bloc's goods trade deficit with China came to about 360 billion euros last year, led by electrical and electronic equipment at 136.9 billion euros, followed by machinery at 61.2 billion euros and chemicals at 15 billion euros. The automotive deficit was just 13.5 billion euros.
Concerns have also been raised that China could redirect vehicles originally bound for Europe to other markets, including South Korea. Beyond BYD, which already operates in South Korea, Xiaomi is among those now eyeing entry. A source in Beijing, however, played down the risk. "South Korea has a relatively small domestic market and demanding consumers, so it ranks lower than Europe from China's perspective," the source said. "It is not the first place China would push volumes blocked in Europe."