Analysts say EU hybrid quota limits China's Europe push only at the margin

Hormuz oil flows run 38% below prewar baseline as tanker rates surge

The European Union’s deal with China to halve the latter’s hybrid-car exports to the region over the next four years is modestly negative in the near term but manageable, Bernstein analysts wrote in a note Monday. In the longer term, Bernstein said, the impact should be largely neutral because major Chinese automakers are already localizing production in Europe: BYD is set to start production in Hungary by the end of 2026, Leapmotor is using Stellantis’s manufacturing footprint in Spain, and Geely is targeting production at Ford’s Spain plant from 2028. The brokerage said it doesn’t expect the measures to materially derail market-share gains by Chinese automakers beyond an initial adjustment period, drawing a comparison with EU tariffs on fully electric vehicles. The key question, Bernstein said, is whether automakers can preserve unit economics as production localizes.

Capital Economics said the agreement could serve as a blueprint for future deals. “There is mounting pressure from other industries such as chemicals and machine tools for similar for protection,” the firm wrote in a note Monday. If the approach were extended to all the industries targeted by the EU’s Industrial Accelerator Act, Capital Economics said, it could potentially affect around a quarter of all imports and have a bigger impact on the wider economy, adding that it remains to be seen whether China will agree to similar restrictions in other and potentially much larger sectors.

Oxford Economics was more skeptical. Chief Europe Economist Angel Talavera wrote in a report that “Chinese car makers are widely expected to ramp up their efforts to establish domestic production in Europe to bypass the import quota,” and that the deal does not address issues linked to Chinese exports in other industries. “Ultimately, Europe has little power to change the underlying imbalance, because it is systemic in nature and reflects Chinese domestic conditions: large industrial subsidies, an undervalued currency and a Chinese domestic market that cannot absorb the country’s production means that sectoral measures work only at the margin,” the report said.

Jefferies analysts said the impact of the China-EU deal on hybrids will mainly fall on SAIC, BYD and Chery, which together account for more than 90% of sales of Chinese hybrid vehicles in the EU. Chinese automakers may opt to prioritize higher-priced models, which could lead to stiffer competition with premium German brands, Jefferies added. BYD is well positioned through its Hungary plant, while Chery is expanding local production in Spain; XPeng and NIO are more exposed to trade restrictions on fully electric cars. European automakers could face renewed competitive pressure following the new trade agreement, the firm said.

On energy shipping, Kpler data showed confirmed oil flows through the Strait of Hormuz averaging 10.5 million barrels a day in the seven days to Oct. 10, about 38% below the prewar baseline of 17.1 million barrels a day. Confirmed flows fell to 2 million barrels a day on Oct. 10, from 6.7 million on Oct. 9 and 22.8 million on Oct. 8 — underscoring significant daily volatility. Kpler said the latest figures are preliminary and might be revised higher as additional tanker movements are confirmed, and that the data excludes Iranian-origin transits. The firm said increased attacks on tankers and elevated maritime risks continue to disrupt shipping through the key oil-export route, while high freight rates are expected to persist through the fourth quarter.

ANZ said oil-tanker freight rates have surged as rising attacks and longer shipping routes squeeze vessel availability in the Middle East. The cost of chartering a very large crude carrier to ship oil from the Persian Gulf to China has climbed to nearly $1 million a day from about $230,000 on the eve of the war, ANZ said, citing shipping-data provider Clarkson. Freight costs have also surged on other routes, with one U.S. tanker cargo booked last week at $41 a barrel, and second-hand tanker prices have risen to a record $240 million. “A shortage of the tankers needed to ship oil has emerged as a key constraint on Middle East oil flows, raising questions about the sustainability of recent export gains and increasing the risk of supply disruptions in the months ahead,” ANZ analysts said.

Equity analysts covering European automakers struck contrasting notes ahead of third-quarter results. Citi wrote that Renault has done “such a great job this year,” saying that when investor sentiment couldn’t be any worse and almost all commentators believed Renault should fail, it now seems likely the French company will be one of the few EU automakers that won’t cut guidance in 2026 and will report one of the highest group EBIT margins. Citi lowered its target price on the stock to 35 euros from 38 euros and kept its buy rating. Shares rose 2.5% to 27.17 euros. Deutsche Bank took a cooler view: analyst Christoph Laskawi wrote that Renault’s third-quarter results will likely reflect recent market trends — negative volumes but a top line driven by positive product mix — and that the bank expects revenue roughly flat on year. Deutsche Bank sees a risk that guidance will be changed to a margin of more than 5%, drifting down from the current guide of the low end of around 5.5%, and lowered its target price to 30 euros from 35 euros while keeping a hold rating. Shares rose 1.8% to 26.98 euros.

At Porsche, AlphaValue analyst Adrien Brasey wrote that the company’s investor event presented a coherent and realistic strategy built on value over volume, exclusivity and personalization, with a brand that remains exceptionally strong. “However, the recovery will be long,” Brasey wrote, adding that 2027 will be the trough, with new products only contributing from 2028-2029, and that management has anchored to the low end of a 10%-15% margin target for 2030-2031. Brasey said the new cash flow target and payout ratio are the main positives, but China and U.S. tariffs cap the upside. AlphaValue maintains its sell rating and 35.80 euro target price. Shares rose 2% to 42.36 euros.

Bank of America analysts wrote that European airlines are likely to continue cutting short-haul capacity but that trans-Atlantic routes should prove more resilient. Winter capacity cuts should further support the supply-demand balance and fares in short-haul, they said. “Lower capacity guides should support unit revenues but could pressure ex-fuel unit costs as fixed costs are spread across fewer seats,” the analysts added.

In Asia, auto-component maker Johnson Electric issued a first-half profit warning that came in below market expectations. Deutsche Bank analyst Bin Wang wrote that the surprise stemmed from an adverse foreign-exchange swing versus gains recorded a year earlier, and that margin pressure from competitive conditions in China’s auto market and provisions for customer credits and claims will also weigh on results. Deutsche Bank cut its forecast for the fiscal year ending March 2027 by 38% to $160 million and lowered its target price to 33.50 Hong Kong dollars from HK$40.00, maintaining its buy rating. Shares fell nearly 18% to HK$13.89.