EU Quotas on Chinese Hybrid Cars: A Public Relations Coup or a Harbinger of a Tougher Approach to Chinese ‘Overcapacity’? 

This commentary forms part of the work of the IEP Bocconi Trade Topic Group, an interdisciplinary task force examining international trade and EU trade policy as part of the Institute’s 2026-27 annual cycle. The group’s findings will be published in an IEP Bocconi report. 

Headlines in leading international papers report that the EU will impose a quota that would halve EU imports of hybrid cars from China. One part of this is misleading because the ‘halving’ refers to the number of cars that might result if one were to extrapolate last month’s growth rates into the future.

The quota will be fixed at 350 thousand cars per year, and, following good World Trade Organization (WTO) practice, will be increased by 6% every year.

EU imports of hybrid cars from China were equal to 300 thousand in 2025, with an increase of 6 % one arrives at 318 thousand. No wonder that China did agree to a quota of 350 thousand. But the EU can claim that it prevented further increases.

These numbers should be compared to annual sales of hybrids in the EU in the range of 4-5 million units (summing 1million plug-in hybrid electric vehicles - PHEVs - and close to 4 million mild hybrid electric Vehicles (M)HEVS). The market share of China would thus be contained well below 10%.

Clever legal design

It appears that the EU will formally apply a standard WTO safeguard mechanism which allows a country to impose temporary protection (4 years, renewable once) if an unforeseen surge in imports threatens serious injury to domestic industry. The almost 3-fold increase in imports of hybrids from China in 2025 (from about 100 in 2024 to 300 thousand units) could serve as the legal justification.

To comply with Article 2.2 of the WTO, the EU must officially declare a global quota on all imported hybrid vehicles.

However, under Article 5 of the Safeguards Agreement, import quotas can be allocated among supplier countries based on their historical market share.

By carefully defining the historical reference period and the specific technical parameters of the targeted plug-in hybrids, it will be possible to ensure that China absorbs virtually the entire restriction, so that imports from allies like Japan or the United States are not affected.

Why hybrids?

The new measure aims only at hybrids, not fully battery electric vehicles (BEVs). Imports of BEVs from China are already subject to high anti-subsidy tariffs, although they seem to have had little effect.

It is often argued that Chinese producers have started exporting more hybrids to the EU because of the tariffs on BEVs.

However, the reason for the surge in Chinese exports of hybrids is the evolution of China’s domestic market: Demand for hybrids has fallen abruptly in China this year as incentives for many forms of hybrids were withdrawn and consumers shifted towards BEVs.

The Chinese government is thus concentrating its consumer subsidies towards BEV.

Moreover, overall car sales have been weak. Domestic sales of PHEVs alone fell by about 500 thousand units in the first half of 2026 compared to a year earlier. The export push in hybrids was thus due more to a fall in domestic demand making exports the natural outlet for existing domestic capacity, which keeps expanding.

There is little evidence that the surge in Chinese hybrid exports was particularly directed towards the EU because of its BEV tariffs. About 20-25% of overall Chinese exports of hybrids went to the EU in 2024/5 and this share has changed little in 2026.

An interesting side observation is that overall EU imports of BEVs have increased strongly in 2026, but the share of China in EU imports of BEVs fell has not increased. This is why the Commission had no reason to tighten import restrictions on BEVs.