A Soft Landing: China, EU Reach Agreement on EV Exports

Beijing and Brussels have announced a formal consensus on "price undertakings," marking a fundamental shift in strategy for Chinese automakers and signaling a "soft landing" for the global automotive industry.

This breakthrough follows almost two years of intense trade friction during which the world watched with bated breath as the two powers locked horns over a potential trade war. The tension reached its peak in late 2024 when the European Union imposed anti-subsidy duties as high as 35.3 percent on top of existing tariffs, but this new agreement moves the industry toward a period of managed competition.

By committing to a Minimum Import Price, major exporters like SAIC, BYD, Chery and Geely can effectively eliminate these extra duties, though they must sacrifice the aggressive discounting that allowed them to capture a record 12.8 percent of the European electric vehicle (EV) market by late last year.

Paradoxically, while this prevents them from undercutting European rivals like Volkswagen or Stellantis on price, it provides a floor that may actually stabilize and improve their profit margins. Instead of a race to the bottom, the competition has shifted to who can offer the most technology and "luxury feel" at that mandatory minimum price point.

The desperation for a deal was fueled by the sheer scale of the 2025 export figures.

For the first 11 months of last year, according to the China Passenger Car Association (CPCA), the EU solidified its position as the top destination for Chinese clean EVs across all categories, including battery EVs, plug-in hybrid EVs and hybrid EVs.

For example, China exported 580,000 units of battery EVs to Europe, occupying 28 percent of total exports and the figure for plug-in hybrid EVs and hybrid EVs reached 27 percent and 39 percent, respectively.

The 2026 agreement does more than just regulate prices; it explicitly signals that the EU is open to Chinese investment. Cui Dongshu, secretary-general of the CPCA, said that in the initial phase of the price undertaking mechanism, some automakers may experience short-term fluctuations in sales volume as they adjust their product pricing and structures.

"However, as companies adapt to the new rules and product competitiveness continues to improve, the sales are expected to grow back gradually," he noted. "I project that between 2026 and 2028, China's EV exports to the EU will maintain an average annual growth rate of approximately 20 percent, serving as a vital engine for growth in the global EV market."

Cui also speculated that Chinese automakers will accelerate their localization efforts within Europe to circumvent the complexities of price undertakings and mitigate long-term trade risks.

"We are already seeing a 'multi-point' manufacturing landscape emerge – BYD is nearing trial production at its Hungary facility; Chery has moved forward with its joint-venture plant in Spain; SAIC and Nio are reportedly scouting secondary sites for European assembly bases," he observed.

"By building cars in Europe, these companies will embed themselves in the local supply chain, a move that makes them 'European' enough to survive future geopolitical shifts."