EU deal with China limits imports of hybrid electric vehicles

The EU is to limit the number of hybrid electrical vehicles imported from China to 350,000 cars a year, the European Commission has confirmed.

Imports have been soaring in the last two years with about 800,000 battery and plug-in hybrids likely to be sold this year.

The EU expects that the quota, which will come into force in December, will halve China’s market share which now stands at 6% in a landmark four-year agreement made in Beijing last week.

The annual limit on imports of hybrids will be taken under the World Trade Organization safeguard measures, which mean it can be implemented swiftly without the type of investigations needed in anti-dumping measures.

Any cars imported above the quota level will not be subject to tariffs, but will remain blocked in customs at docks in Europe.

Chinese vehicles or assembled within the EU, such as those made in Hungary or, in future, Spain, will not be subjected to the quota, officials have confirmed but EU companies making cars in China will be subjected to the quota.

As part of the deal, China has also agreed to drop some tariffs on auto parts and cut duties by half on footwear, olive oil and ice-cream from the EU.

Officials stressed that the quota is fully supported by China with further dialogue on cars and other imports including chemicals, renewable energy and furniture continuing.

“We will continue the dialogue on some products … this is by no means the end of the story,” said an official.

Last month the EU called for feedback on a new rule which could oblige companies to diversify their supply chains while theMade in Europe legislation would do the same in public procurement.

On Thursday EU leaders will discuss a French-German proposal for a “kill switch” or new instrument which would allow Brussels to block access to the single market for certain goods in the event of any harmful event, such as a ban on rare earths crucial for the tech and automotive industries.

The deal on hybrid EVs comes amid mounting concern over the £1bn (€1.18bn) a day trade deficit the EU is now running with China.

Up until recently the EU’s strategy at tackling what they say is an “unsustainable” trade imbalance is to seek to increase imports to China.

Sources said there has been “a paradigm shift” with concerns of deindustrialisation and job losses in the industrial heartlands forcing a renewed focus on curbing imports rather than increasing exports.

“We are closely surveilling, our imports. We know what’s coming in. We know where there’s a surge, and we know what hits the hardest in terms of our deindustrialization,” said an official.