Shares in European automotive manufacturers advanced on Monday after the European Union and China reached a preliminary understanding aimed at reducing Chinese exports of hybrid and plug-in hybrid vehicles to the European market.
European Trade Commissioner Maros Sefcovic announced the development following two days of negotiations in Beijing, indicating that the arrangement could reduce Chinese hybrid vehicle exports to the EU by more than half.
According to Sefcovic, the understanding could result in several million fewer vehicles being imported into the bloc over a four-year period. However, he did not provide details on how the proposed restrictions would be implemented.
European automotive stocks recorded gains following the announcement. Stellantis (BIT:STLAM) and Renault (EU:RNO) both rose more than 2%, while Volkswagen (TG:VOW3) and Porsche (TG:PAH3) advanced by over 1%.
The development comes as European carmakers face pressure from US tariffs and increasing competition from Chinese manufacturers, factors that have weighed on the sector over the past two years.
Sefcovic described the agreement as an initial measure in addressing trade imbalances between the EU and China.
“This is far from the end. It is a crucial first step – but only a first step – in the process of rebalancing,” he said.
The EU’s trade deficit with China has increased to more than €1 billion per day, according to the figures cited during the discussions.
European Union leaders are scheduled to review the outcome of the negotiations at a summit in Brussels next Thursday.
The talks also produced agreements covering tariffs on European exports and Chinese export licensing procedures.
China agreed to reduce import duties on approximately €4 billion worth of EU exports, including automotive components, olive oil and footwear.
Both sides also reached an understanding on facilitating Chinese export licences for rare earth elements and permanent magnets, materials used in several European industrial sectors.
Bernd Lange, chairman of the European Parliament’s trade committee, said the approach to hybrid vehicle imports should be extended to other industries. He also called for more effective use of the EU’s existing trade defence instruments.
China’s Commerce Minister Wang Wentao rejected the suggestion that China was responsible for the European Union’s economic difficulties.
According to China’s Commerce Ministry, Wang said China was “not the root cause” of the EU’s problems but a partner in addressing them.
The negotiations come amid concerns among EU governments over increasing Chinese vehicle imports and employment reductions across the European automotive industry.
Volkswagen has announced job reductions affecting approximately 100,000 positions, according to the figures cited in the report.
Imports of plug-in hybrid vehicles into the EU increased by 86% in the year to September, while their prices declined by 20%. More than half of these imported vehicles now originate from China.
Although the preliminary understanding signals potential changes to trade flows, the timing, implementation mechanisms and final scope of the proposed restrictions have not yet been specified.
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