SHANGHAI, China: Chinese automakers that sharply increased plug-in hybrid shipments to Europe after the EU imposed additional tariffs on Chinese-made electric vehicles now face new restrictions under a trade agreement between Beijing and Brussels.

China's hybrid exports to the European Union's 27 member states tripled to US$7.5 billion in the first half of 2026 from $2.5 billion a year earlier, according to Chinese customs data. The figure was nearly nine times the $845 million exported during all of 2021.

Automakers increasingly turned to plug-in hybrids after the EU imposed additional tariffs on Chinese-made EVs in 2024 because hybrids were exempt from the extra duties. Weak charging infrastructure in parts of Europe has also supported demand.

SAIC, BYD and Chery accounted for more than 90 percent of Chinese hybrid sales volume in the EU, while hybrids represented more than half of their European sales, according to Jefferies.

Chinese brands captured a record 15 percent share of Europe's EV market in the second quarter, up from 9.5 percent in the first quarter of 2024. Chinese plug-in hybrids accounted for more than a quarter of the segment, compared with just 1.7 percent at the beginning of 2024, according to Schmidt Automotive Research.

European Trade Commissioner Maros Sefcovic said on October 9 that the agreement would cut imports of "several million cars over four years," although Brussels and Beijing have not disclosed how it will be implemented.

China's Commerce Ministry said on Monday the arrangement would allow continued export growth and guarantee China a quota no smaller than that granted to any other source of imports.

Changan President Zhao Fei said at the Paris auto show on Monday that he was "not that concerned" by the agreement, viewing it as a preamble to 'Made in Europe' local content rules that could be addressed by establishing production in the region.

"This actually provides opportunities for Chinese companies like Changan to enter the European market," he said, adding that the company plans to produce its first cars in the region early next year.

Investors largely viewed the agreement as a de-escalation of trade tensions and an indication that tariffs on Chinese hybrids may be avoided for now. BYD shares fell 1.8 percent, while Chery and SAIC gained 1.4 percent and 0.5 percent, respectively.

"Overall, we believe it is a risk-relief rally story...as the implementation rules, volume caps, price floors, carve-outs are still pending technical negotiation," Citi analysts said.

BYD, China's largest hybrid vehicle exporter to Europe, sold more plug-in hybrids than fully electric models during the first eight months of the year. Together with Chery, SAIC and Geely, it has narrowed the gap with Volkswagen, which still held a 31.8 percent share of the EU plug-in hybrid market.

Analysts said the agreement could accelerate Chinese automakers' plans to manufacture vehicles in Europe, even if some companies increase exports before any quota system takes effect.

Jefferies analysts said the agreement signaled "tariff risk off, quota risk on," potentially pushing Chinese automakers toward higher-priced models, increasing pressure on German premium brands and accelerating plans to manufacture more vehicles in Europe.