EU to open hybrid car safeguard probe this week

The European Commission plans to open a safeguard investigation into hybrid vehicle imports this week, according to Maeil Business Newspaper, which cited government and industry sources in Brussels. The probe would turn an October deal with Beijing into a legal measure. It would cut Chinese hybrid imports from about 800,000 units expected this year to 350,000 a year, and that could take effect as early as December. World Trade Organization rules say safeguards cannot target a single country, so the quotas could also cover exporters such as South Korea and Japan.euobserver.com+1

How the cap would work

The cap covers both standard hybrids and plug-in hybrids. It would last four years and grow by 6% a year starting in the second year. Reports differ on what happens to cars above the quota. Borderlex said customs would simply stop clearing Chinese-origin vehicles once China's quota runs out. Politico, by contrast, described a quota with tariffs on volumes above it. Trade Commissioner Maroš Šefčovič said it was the first time Beijing had agreed to limit exports without an EU investigation.borderlex.net+1

What counts is where a car is built, not who owns the brand. Chinese-brand cars assembled inside the EU are exempt. European carmakers' China-built hybrids count against the quota. Brussels already sees the hybrid deal as a model. Commission President Ursula von der Leyen has pointed to possible curbs on Chinese chemicals and machinery next.politico.eu+1

Seoul watches its share

During the investigation, the EU is considering country-specific quotas for South Korea, Japan, Turkey, the UK and the US, based on how much each has shipped recently. The Commission says other countries' quotas may not be cut as sharply as China's, since most of the recent import surge came from China. Even so, a free trade agreement does not guarantee a preferential quota, JKN reported.news.jkn.co.kr

That uncertainty matters for Hyundai Motor and Kia. The two sold about 181,000 hybrids in Europe through August, roughly a quarter of their sales there, and 34.8% of all hybrids sold in Europe were built in South Korea. Korean industry groups are asking Seoul to press Brussels for enough quota.news.jkn.co.kr

BYD builds locally

BYD says it will expand its factories in Europe to get around the barriers. "Europe is a very important regional market for BYD. We will not let tariff increases affect local consumers' choice of BYD," Vice President Liu Xueliang told the South China Morning Post. He said new European plants would open "soon." BYD's Hungary factory is due to start mass production this quarter. The company has also discussed two more plants and using idle capacity at Stellantis ↗ 1.47%.caixinglobal.com+1

Exporters have been rushing to ship cars before the deadline. China's hybrid exports to the EU reached almost 100,000 vehicles in September.scmp.com