China, EU agree to halve Chinese hybrid vehicle exports under new trade deal

BEIJING, 11 OCTOBER 2026 —

European Union trade chief Maroš Šefčovič announced Friday that China has agreed to cut its exports of hybrid electric vehicles to the EU by half, marking a de-escalation in a simmering trade dispute between the two economic blocs.

The agreement, reached after two days of talks in Beijing with China’s Commerce Minister Wang Wentao, was framed as a "positive first step" amid rising tensions over Europe’s growing trade surplus with China.

The move follows months of EU pressure on Beijing to voluntarily reduce hybrid car exports, which have surged in recent years, flooding European markets and straining relations. Germany and France had previously urged the EU to develop a "last-resort" trade instrument to address the imbalance, signaling growing frustration over China’s export practices.

Šefčovič clarified that the final decision on the export cuts would still require approval from the European Commission, though he described the talks as constructive.

China’s Commerce Ministry released a statement listing 16 "consensus outcomes" from the discussions, including the hybrid vehicle export reduction. Among other agreements, Beijing also committed to issuing licenses for rare earth and permanent magnet exports to the EU—a critical supply chain issue for European industries reliant on these materials. However, Šefčovič did not provide a timeline for when these rare earth exports would materialize.

The talks took place against the backdrop of escalating trade friction, with the EU and China holding their first formal Trade and Investment Consultations meeting on June 29. The next round of discussions is scheduled for March, with a video conference planned for January, according to a Chinese government readout.

The agreement on hybrid vehicle exports comes as both sides seek to avoid broader trade restrictions, particularly after the EU’s recent probe into Chinese electric vehicle subsidies.

For Malaysia, the development carries indirect but significant implications. As a key player in the global automotive supply chain—particularly in electric vehicle components—the EU-China détente could influence raw material prices and trade flows affecting Malaysian manufacturers and exporters. The rare earth export licenses, if implemented, may also ease supply chain pressures for Malaysian firms dependent on these minerals for electronics and green technology production.

The next critical step will be securing formal EU approval for the hybrid vehicle export cuts, with Šefčovič’s optimism suggesting progress—but leaving room for further negotiations before any concrete measures take effect.