China's Cars
Pour Overseas

Seven straight months of 20%-plus declines;
industry margins sink toward 1%

China's passenger-car retail sales fell 27.1% year on year to 1.643 million in October.³ Even domestic sales reported by automakers were down 25.2% over January–October (CAAM).⁴

• Internal-combustion vehicles took the biggest hit. October retail sales fell 45% for internal-combustion vehicles and 13.7% for new energy vehicles (NEVs).^{3, 5} Hana Securities cites high fuel prices, a higher vehicle purchase tax, reduced subsidies and weaker consumer confidence.
• The reported 13.1% rise in NEV sales was driven by exports. Of total manufacturer sales of 1.94 million NEVs, 606,000 were exported—2.4 times the year-earlier level. Excluding exports, domestic sales fell by approximately 9%.⁴
• Profitability is being squeezed. The automotive manufacturing industry's profit-to-revenue ratio was 1.4% in September and 3.3% for January–September.³

56 exports for every 100 domestic retail sales—
but not every exported car is sold

China exported 928,000 passenger cars in October, up 68.5% year on year. Exports now represent 35% of total manufacturer sales, up from 19% a year earlier.³

• NEVs accounted for 91% of the increase in exports. Of the 377,000 additional vehicles exported year on year, 344,000 were NEVs.³
• A large share went to Europe. China exported 1.83 million vehicles to the EU over January–September (+87%), already more than in all of last year. Of these, plug-in hybrids (PHEVs) accounted for 654,000 (+372%).⁶ After the EU imposed countervailing duties on battery-electric vehicles (BEVs), exports shifted toward hybrids subject only to the standard 10% tariff, according to Hanwha Investment & Securities.⁷

An export count measures shipments—not final sales

IEA found that more than 1 million electric cars, including PHEVs, exported from China over the past 18 months had not yet been registered as sold abroad. The gap is too large to attribute solely to shipping lags, suggesting that some destination markets may have accumulated above-normal inventories.⁸ That is why rising exports should not be treated as an equal rise in overseas demand.

The IEA figure is an 18-month cumulative gap between exports and overseas registrations—not a confirmed count of unsold cars or inventories sitting solely in the EU.

China calls the same 350,000-vehicle quota an increase;
the EU calls it a cut

They use different baselines. China compares the quota with last year's 302,000 imports; the EU compares it with the volumes expected without restrictions. The agreement would roll back this year's surge and hold imports close to last year's level.

The Commission president said imports would be reduced by 'about 45%'.¹ The EU trade commissioner said the measure would cut imports by more than half—millions of vehicles—compared with a four-year forecast assuming no restrictions.^{11, 12} The chart's −56% is a simple comparison with projected 2026 imports of roughly 800,000 vehicles, not an official EU estimate of the reduction. China's Ministry of Commerce separately disclosed neither a quota figure nor an implementation date.⁹

Four implications to watch

• Three Chinese groups are most exposed. According to Jefferies, SAIC, BYD and Chery account for more than 90% of Chinese hybrids sold in the EU. Hybrids make up more than half of the three groups' European sales.¹⁶ How quotas would be distributed among companies remains under discussion with Chinese authorities.¹⁴
• EU-built vehicles stay outside the import quota. Chinese-brand cars assembled within the EU are not imports and therefore fall outside the cap.¹⁷ BYD's Hungarian plant, with planned annual capacity of 150,000 vehicles, is due to begin production in Q4 2026.⁷ Its first model, however, is fully electric, so the extent to which local production can replace hybrid imports remains uncertain.¹⁸
• Restricted shipments can be redirected. CPCA secretary-general said limits would affect PHEV exports but were unlikely to derail total NEV exports, noting potential demand in Latin America, Australia, the Middle East and Africa.¹⁹
• China is tightening its own export incentives. NEV export VAT rebate rates will fall from 13% to 9% in April 2027.²⁰ Deutsche Bank estimates the change could reduce BYD's net profit by about CNY 5,000 per exported vehicle.²¹

Hana Securities expects a front-loading of shipments in November, before the EU quota, and again in Q1 2027, ahead of the rebate reduction.⁵ Another export spike in either period would therefore say little about underlying demand.

EU plants may capture the opening;
Korea-built imports could face a ceiling

Across the wider European market, three Chinese groups (BYD, Chery and SAIC) have overtaken Hyundai and Kia in registrations this year. Within the EU-27 alone, Hyundai and Kia still lead—but the gap is narrowing rapidly.

Source: ACEA²² · All powertrains; percentage changes are year on year

Where do Hyundai and Kia build hybrids sold in Europe?

Based on roughly 181,000 Hyundai and Kia hybrid sales in Europe in Jan.–Aug. 2026 (The Herald Business) · 'Europe' here may cover a different geography from the EU-27

Under the reported framework, national quotas would be based on 2025 imports plus a margin for growth.¹⁵ China's figure rises 16%, from 302,000 to 350,000. Applying a hypothetical 0–16% increase to Korea yields an annual range of 93,000–107,000 vehicles. The three-year average of Korean-built hybrid exports (102,000) also lies within that range. A quota of this size would accommodate the current annualized pace of 82,000, but could limit future growth.

Neither calculation establishes Korea's eventual allocation. The WTO safeguard agreement's representative three-year average concerns the overall import volume; country shares are determined separately by consultation or historical supplier shares.²⁷

• Local EU production would matter more if quotas constrain imports. In Q2, hybrids represented 30.2% of Hyundai's European wholesale volume and 22.2% of Kia's Western European retail sales.²⁸ Hanwha Investment & Securities sees potential upside for firms with a European manufacturing footprint, such as Hyundai Motor and Hyundai Mobis, but warns that a broader application of the safeguard could restrict Korean-built vehicles.⁷ Factory capacity is finite, however, making it difficult to shift Korean production to Europe immediately.
• Seoul is pushing back. At the WTO on October 26, Korea questioned whether the EU had agreed to volumes with a particular country even before opening a formal investigation.^{29, 30} Korea is also pursuing a November visit to Brussels by its trade minister and a joint submission from the auto industry.³¹
• Direct competition from Chinese brands remains limited in the US. Chinese-built EVs face a 100% Section 301 tariff, while US connected-vehicle restrictions begin phasing in with model-year 2027 vehicles.^{32, 33} Hyundai and Kia's combined US market share reached 12.0% in October, up 0.6 percentage points.³⁴

Kia sold more cars—
but price competition eroded the gains

No available data isolate the amount by which competition from Chinese cars reduced Korean automakers' profits. Company results do, however, show the broader cost of competing on price.

• Kia gained volume but conceded price. Kia's Western European sales rose 16.9% year on year to 145,000 in Q3, versus 3.5% market growth. Kia said higher sales incentives and price reductions to support EV sales in Western Europe and Korea reduced operating profit by KRW 727 billion.³⁵ That figure reflects EV promotions, not a direct effect of the hybrid safeguard. Hana Securities argues that greater competition is likely to show up first in transaction prices and incentives, rather than unit sales.³⁷
• Exchange rates helped in Q3 but may become a headwind next year. The average exchange rate in Q3 was KRW 1,423 per USD, compared with KRW 1,385 a year earlier, adding KRW 529 billion to operating profit.³⁶ But the won appreciated by roughly 6% from the previous quarter, and brokerages are factoring that strength into next year's forecasts.³⁸

Forecast revisions are not the same as projected profit declines

Sources: Kiwoom Securities, Hanwha Investment & Securities, and Financial News (citing Meritz Securities)^{38, 39, 40} · The first two figures are downward forecast revisions; the third is a forecast year-on-year profit decline.

At the November 13 close, three-month share-price declines stood at 35.6% for Hyundai Motor, 31.1% for Kia and 22.4% for the KOSPI.⁴¹ There is no reliable basis for isolating the share of those declines caused by competition from Chinese cars.

EU provisional measures possible in early December;
China's export rebate falls next April

1. Nov. 14
   EU investigation: stakeholder registration deadline15 days after Official Journal notice
2. Nov. 20
   EU investigation: comments and hearing-request deadline21 days after Official Journal notice
3. November
   Korean trade minister's proposed Brussels visit · Korea's October auto-industry dataKorea-built hybrid export volumes
4. Late Nov.
   ACEA: October new-car registrations in EuropeChinese brands' shares vs. Hyundai and Kia
5. Early Dec.
   Reported EU provisional-measure target · CPCA November salesEvidence of pre-quota export front-loading
6. Apr. 1, 2027
   China lowers NEV export VAT rebate: 13% → 9%Based on customs declaration date
7. Late Jul. 2027
   EU safeguard: final-decision deadlineNine months after initiation; two-month extension possible

Dates in KST · Sources: EU Official Journal, US International Trade Administration, Agence Europe, EToday, China's State Taxation Administration⁴²

What could delay or change the outcome?