European automakers gain breathing room from EU-China hybrid car deal

Investing.com -- European automakers are heading into next week’s Paris Motor Show with some relief after the European Union and China reached a preliminary agreement to cut Chinese hybrid vehicle exports to the bloc by more than half.

The agreement, reached Friday, could ease competitive pressure on Volkswagen, Stellantis and Renault, which are struggling with declining sales and growing competition from Chinese manufacturers.

Details of the arrangement remain limited, although Germany’s VDA automotive association described it as an initial positive signal.

Chinese automakers have expanded aggressively across Europe as domestic demand weakens. Their hybrid vehicles currently avoid the additional EU tariffs imposed on Chinese-made battery-electric cars.

Chinese brands captured nearly 12% of Europe’s new-car market in August, according to Dataforce. EU imports of Chinese cars and light commercial vehicles surged almost 75% to nearly 770,000 units during January-August.

European manufacturers face mounting financial pressure. Mercedes-Benz reported an 8% decline in third-quarter car sales, while Volkswagen recently lowered its profit outlook following a similar warning from BMW.

The Paris Motor Show, running October 12-18, will highlight efforts to defend European market share through affordable electric vehicles and new partnerships.

Renault’s Dacia brand will showcase its second-generation Spring electric car, priced below €18,000 in France.

Volkswagen plans to present its ID. Tiguan alongside a broader strategy involving four smaller electric vehicles manufactured in Spain.

Stellantis will display more than 60 vehicles across eight brands, including a Citroën electric concept developed using technology from Chinese partner Leapmotor.

Chinese competitors BYD, XPeng and Zeekr will also showcase expanded lineups, reinforcing their ambitions in the European market.

Beyond vehicle imports, European manufacturers remain exposed to China’s dominance in rare earths, battery materials and automotive components.

Brussels is also considering legislation favouring EU-assembled vehicles with substantial European content, adding another potential layer of protection for domestic manufacturers.