New Delhi, Oct. 9 -- The European Union said China will slash millions of hybrid car exports to the bloc under an agreement meant to ease mounting trade tensions.

"We have reached a shared understanding to moderate China's exports of hybrids and plug-in hybrids to the EU," the EU's trade chief, Maros Sefcovic, told reporters in Beijing Friday. "This opens the prospect of cutting China's exports by more than a half."

The Stoxx 600 Automobiles & Parts Index rallied after the announcement, trading about 2% higher on the day, with D'ieteren Group and Renault SA among the biggest gainers.

Sefcovic was speaking after two days of talks with Chinese Commerce Minister Wang Wentao meant to show progress before EU leaders meet Thursday to discuss...