A first cap on Chinese hybrid exports

China agreed for the first time to limit its exports of hybrid cars to the EU, in a deal reached in Beijing during the week of 5 October. China's market share in hybrid cars rose from 2 percent in 2024 to as much as 25 percent, according to Tages Anzeiger. The new arrangement sets an annual export quota that halves previous shipments and cuts several million vehicles by 2031. Imports are initially capped at 350,000 vehicles a year. Trade Commissioner Maroš Šefčovič had agreed with Chinese Commerce Minister Wang Wentao at a meeting in Brussels at the end of June to start a trade dialogue, and he began with cars because the EU still has leverage in one of the few large markets open to Chinese makers.

Berlin changes course

Chancellor Merz, speaking after the Franco-German ministerial council in mid-July, described a daily trade deficit with China of about one billion euros that hurts domestic industry. He blamed not only the strength of Chinese suppliers but also a 'drastically undervalued' currency and 'highly subsidised overcapacity'.

I am not prepared to accept that things can stay as they are now.

Merz argued that this arrangement burdens jobs in Europe one-sidedly. Merz and SPD leader Klingbeil have carried out this policy shift with little public attention, and Germany and France are largely pulling in the same direction. Berlin wants to push the shift forcefully at the European Council on Thursday, 15 October.

Austria's Made in Europe pledge

On Wednesday, 14 October, the Austrian government signed a 'Made in Europe' declaration at the Chancellery that favours EU producers in public tenders. The signatories included the economy minister, the infrastructure minister (SPÖ), state secretary Sepp Schellhorn, Verbund CEO Michael Strugl and the heads of Austrian industrial companies. Wifo forecasts growth of just under 1 percent for 2026. Only part of public procurement can realistically be redirected, and supply chains risk becoming a bureaucratic burden. The decisive industrial policy choices, however, are being made in Brussels under the Industrial Accelerator Act, which is still being negotiated.

Britain's place in the Made in Europe law

Ola Källenius, head of Mercedes-Benz and president of the European Automobile Manufacturers' Association (ACEA), told an annual briefing in Brussels that excluding the UK would be a deliberate choice by EU leaders to hurt the car industry across the bloc.

We would hurt our industry in the UK and the EU.

He also said the Industrial Accelerator Act is about building local supply chains in Europe.

We are talking about how we industrialise more in Europe, how we build local supply chains, that is what the IAA is all about.

The UK prime minister intends to raise the issue at the UK-EU summit on 20 November, while EU leaders aim for political agreement on the current text by December. Andy Burnham has lobbied hard for inclusion but faces resistance, particularly from France. UK business secretary Jonathan Reynolds said on a trip to India that aligning with the EU's tariffs on Chinese vehicles was not on the cards. The ACEA is also pressing for an urgent suspension of planned 10% tariffs on UK electric vehicles entering the EU and EU electric vehicles entering the UK.

What comes next

EU leaders meet in Brussels on Thursday, 15 October, to give their first reaction to the hybrid car deal. A joint statement says both sides will keep talking about market access for medical devices and the Foreign Subsidies Regulation. Belgian MEP Kathleen Van Brempt, of the Socialists and Democrats, called the outcome of the Beijing talks some sort of trade result, while pointing to an OECD study that puts Beijing's industrial subsidies up to eight times higher than elsewhere. China's Commerce Ministry has reserved the right to retaliate if the agreement does not work as agreed. Šefčovič will hold further talks with Wang Wentao in January 2027 and meet again in March 2027.