EU made-in-China car cap flashes amber warning

BYD

23/09/2026 13:00

The author is a Reuters Breakingviews columnist.  The opinions expressed are her own.
By Katrina Hamlin
HONG KONG, Sept 23 (Reuters Breakingviews) - The European Union’s potential quota on made-in-China cars is one of many small speed bumps. Alone, it is far weaker than landmark curbs imposed on Japanese importers in the 1980s. But Brussels' expanding hodgepodge of policies will slow Chinese marques down.
The bloc wants Beijing to cap imports of plug-in hybrid vehicles at 15% of market share, the Financial Times reported on Thursday, as an alternative to additional tariffs. The move is part of an attempt to tackle a trade deficit that topped $1 billion a day last year, whilst protecting legacy manufacturers like Volkswagen VOWG.DE and Renault RENA.PA from the rapid rise of Chinese brands including BYD 002594.SZ, MG, owned by SAIC Motor 600104.SS, and Chery Automobile 9973.HK.
The strategy echoes the tactics Europe used to counter Toyota Motor 7203.T and compatriots. In 1986, Tokyo agreed to limit shipments to the European bloc, an arrangement that lasted over a decade. To keep up sales, the Japanese built out local factories instead.
However, the Japanese approach had far more bite given it covered the mass production of petrol-powered vehicles. Europe’s new curbs, by contrast, target only hybrid cars combining a plug-in battery with a conventional motor, which made up just a tenth of Europe’s nearly 6 million purchases in January to June. A 15% cap would only block some 90,000 sales - barely enough to sustain a factory.
A sweeping Japan-style agreement is unlikely. China, which said on Friday it opposes the plan, needs exports to counterbalance shrinking domestic sales: deliveries in the Middle Kingdom fell 24% in August. But even targeted measures contribute to Brussels' expanding patchwork of policies, in keeping with European Commission President Ursula von der Leyen’s pledge to use “all the tools” to rebalance trade relations.
As well as tariffs of up to 45% on pure battery vehicles from the People’s Republic and 10% on other powertrains, including hybrids, the European Commission has proposed stricter local content requirements for electric vehicles sold in the bloc. This spans batteries, powertrains and electronics.
That is starting to tip the balance. Made-in-China car sales in the EU fell to 17% of the pure electric market in the first quarter, down from a high of 22% in 2024, according to advocacy group Transport and Environment (T&E). Meanwhile, total Chinese auto exports to Western Europe could be nearing a peak, according to Schmidt Automotive Research.
Manufacturing in Europe is gaining appeal. Chinese groups have announced ten facilities there since 2023, enough to produce over 1 million vehicles locally by 2033, T&E estimates. "Everyone is calling us" to strike deals to purchase or use local production, one banker told Breakingviews. Even BYD, which is building plants, is scouring new sites, Reuters reported last week.
     These measures can't come soon enough for Europe's automakers. Last Friday, VW slashed its profit margin target to just 1%, down from its previous guidance of 4% to 5.5% amid plummeting sales in the People's Republic and problems in Porsche P911_p.DE. But if Europe can stitch together a strong enough tapestry of restrictive measures, Chinese exporters could yet end up emulating their Japanese predecessors.
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CONTEXT NEWS
The European Union has requested China voluntarily cap exports of hybrid cars at 15% of market share in the bloc, the Financial Times reported on September 17, citing three people familiar with the situation.
China-made hybrids account for about a third of the EU market now, per the report. In 2025, Chinese-made cars accounted for 12% of the bloc’s plug-in electric car sales, according to the European Automobile Manufacturers’ Association.

(Editing by Aimee Donnellan; Production by Aditya Srivastav)
((For previous columns by the author, Reuters customers can click on HAMLIN/katrina.hamlin@thomsonreuters.com; Reuters Messaging: katrina.hamlin.thomsonreuters.com@reuters.net))