Brussels moves to close the plug-in hybrid loophole in its China car tariffs

Brussels moves to close the hybrid gap

Trade commissioner Maroš Šefčovič and his team fly to China on Wednesday 7 October. Talks are due to start the next day and run late into Friday [4].

The stated aim is "tangible, meaningful and measurable" results before EU leaders meet in Brussels the following Thursday, where China sits high on the agenda [4]. At the centre is a "proof of concept" pilot covering a single sector, expected to be cars, which could then be scaled up to other industries [4]. Brussels has already asked Beijing to restrict hybrid exports voluntarily. It warned that safeguards, quotas among them, could follow if Beijing did not [4]. The Guardian reported that China's response was not known [4].

That makes the October meeting the first test of whether voluntary limits can do the work of duties.

Why plug-in hybrids became the loophole

The EU's countervailing duties on Chinese battery-electric cars took effect on 31 October 2024, on top of the bloc's standard 10% import duty [5].

The rates are manufacturer-specific. BYD pays an additional 17%, taking its total to 27%. Geely pays 18.8% for a total of 28.8%. SAIC, the parent of MG, pays 35.3% for a total of 45.3% [5]. Plug-in hybrids were left outside the measure: they carry only the standard 10% duty and are exempt from the countervailing tariffs [5]. Chinese manufacturers moved into that gap quickly. In May 2026, BYD became Germany's best-selling PHEV brand for the first time, with 4,290 new registrations [5].

The Atto 2 DM-i accounted for 2,113 of those, followed by the Seal U DM-i and the Seal 6 DM-i Touring [5].

Around 70% of BYD's German registrations that month were plug-in hybrids, against 30% battery-electric [5]. Electrive noted that the figures cover one manufacturer in one market, but are likely to indicate a broader European trend [5].

The market shift in numbers

The result is visible at European level. Chinese brands took 28.3% of Europe's PHEV market in the first half of 2026 [1].

The three best-selling plug-in hybrids on the continent were the BYD Seal U, the BYD Atto 2 and the Jaecoo 7, according to Yahoo Finance [1]. The Volkswagen Tiguan PHEV, Europe's top-selling plug-in hybrid as recently as last year, fell to fourth [1]. Chinese EV brands doubled their EU market share in the year after the 2024 tariffs, partly by quadrupling PHEV exports, Merics found [2]. Chinese car exports to Europe rose 26% between 2024 and 2025 to almost 1.2 million vehicles, and imports of Chinese hybrids jumped 155%, according to the Atlantic Council [3].

Merics judged the tariffs' record mixed: positive on offsetting subsidies, a failure on stemming the flow of cars [2]. Product-by-product duties redirected trade rather than stopping it [3].

Why Volkswagen changed its tune

Volkswagen now wants Brussels to move faster. On the group's first-half call in July 2026, CEO Oliver Blume said the EU has no time to lose and must raise tariffs on Chinese-built plug-in hybrids immediately [1].

That is a reversal of sorts. In October 2024, Volkswagen lobbied Germany to vote against EU tariffs on Chinese electric cars, and Germany was one of five member states to reject the measure [1]. Poland's PAP agency, reporting the vote, named the other four as Hungary, Malta, Slovenia and Slovakia [8]. Volkswagen leaders called the tariffs "the wrong approach" at the time [8]. The 2024 duties ran from 7.8% to 35.3%, depending on the manufacturer and on whether the company had cooperated with the investigation [8].

Blume has been precise about where the damage is. The problem, in his words, is "with the plug-in hybrids" [1].

What happens next

The Beijing talks are due to start on 8 October and continue late into Friday 9 October [4]. EU leaders meet in Brussels the following Thursday with China high on the agenda [4].

A second track is already running. The European Commission intends to impose countervailing duties on Chinese hybrid vehicles, according to a Handelsblatt report cited by electrive [5]. Those duties would be manufacturer-specific and likely lower on average than those on battery-electric cars, because the battery is a smaller share of a PHEV's value [5]. Electrive noted that the Commission had denied plans for hybrid tariffs as recently as January [5]. Heads of state and government were set to vote on the measure at an EU summit, with the outcome unknown at the time of that report [5].

Neither side has said publicly whether the talks will pause that duty plan.

The compliance stakes

There is a second reason Volkswagen cares about this segment. Under EU fleet CO2 rules, a plug-in hybrid's official emissions figure uses a utility factor that assumes drivers cover much of their mileage on electric power alone [1].

Real-world data from the EU's Joint Research Centre has repeatedly shown that many PHEV owners plug in far less often than the formula assumes [1]. The cars therefore burn more petrol in daily use than their type-approval numbers suggest. None of that changes what counts on paper: automakers still bank the favourable lab figure toward their fleet average, however the car is driven [1]. Losing the segment to Chinese brands costs Volkswagen compliance headroom it was counting on to keep that average under the ceiling [1].

Cheap Chinese plug-ins were, in that sense, a commercial problem and a regulatory one at once [1].