Chinese carmakers are ramping up local production in Europe to circumvent new EU import quotas on hybrid electric vehicles (EVs) and existing tariffs on pure EVs. This follows an October 9 agreement between China and the EU, which will impose an initial annual quota of 350,000 units on Chinese-made hybrid vehicles from next year, increasing by 6% annually over four years. The EU currently levies tariffs ranging from 17.8% to 45.3% on Chinese-made pure electric cars. Companies like Changan Automobile plan to produce 180,000 units in the EU by 2028, expanding to 300,000 by 2030, while BYD is considering new factories in France and Spain. Other firms are leveraging partnerships, such as Chery with Spain's Ebro, Stellantis with Leapmotor, and Geely with Ford Motor, to utilize idle European plant capacity. JPMorgan estimates the quota could significantly impact Chinese carmakers, as their hybrid vehicle exports to the EU could exceed 800,000 units this year.