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Commission to present industry action plan on March 5

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Carmakers say fines for CO2 emissions is top concern

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Green think tank says emissions targets are achievable

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Commission stands firm on targets, but may be flexible

(Updates after meeting)

By Philip Blenkinsop

BRUSSELS, Jan 30 (Reuters) - European Commission chief

Ursula von der Leyen hosted auto sector executives, unions and

interest groups on Thursday to debate how to help EU car

producers electrify their fleets and take on more advanced

Chinese and U.S. rivals at the same time.

The sector, hit by factory closures and job cuts, including

54,000 job losses among auto suppliers last year, is also

grappling with the threat of U.S. trade tariffs and a reliance

on China for critical minerals and batteries.

The EU executive hosted 22 key players for its 'strategic

dialogue' on Thursday, including the CEOs of BMW, Mercedes-Benz

and Renault and suppliers Robert Bosch and Forvia. It will hold

a public consultation and separate discussions, such as on key

technologies, that will feed into an auto industry plan to be

presented on March 5.

Forvia, Europe's third-largest car supplier, said it was

encouraged by the Commission's focus on the sector and called

the meeting a good first step, but wanted to see outcomes.

Automakers' chief focus has been for the EU to axe potential

fines for auto producers that do not meet fleet CO2 emissions

targets this year.

Renault boss Luca de Meo estimated these could reach 15

billion euros for European producers, with electric vehicles

needing to push beyond a 20% market share to avoid them. The

market share of EVs in Europe dropped to 13.6% last year after

Germany abruptly ended subsidies for EV purchases.

European automakers could choose to meet the electric

targets by reducing petrol or diesel car production or by buying

credits from Tesla or Chinese competitors, industry sources say.

"Basically automakers would buy green credits from the

country which is polluting the most in the world, and fund those

Chinese EV makers on which EU has just imposed tariffs," said

Gianluca Di Loreto, partner at consultancy firm Bain & Company.

Leaders of auto manufacturing hubs Germany, Italy and the

Czech Republic have urged Brussels to waive penalties or have

them calculated over a longer period. The Commission has hinted

at some flexibility, but so far stood fast.

Pro-environment think tank T&E says this is with good

reason. It says the industry has had since 2017 to prepare with

many new cheaper models now hitting the market, that the 2025

targets are achievable and that carmakers are unlikely to face

penalties, with some credit buying, but also increased EV and

hybrid sales. In the worst case, it says, fines would be below 1

billion euros for the sector.

"If you postpone this by a year or by two years, you're not

going to be in a better position. You're postponing something

that is essential to your future success," said T&E executive

director William Todts, who also attended the dialogue.

LONGER-TERM POLICIES

Todts argues that instead of debating fines for months on

end, the dialogue should focus on longer-term policies to help

the European car industry succeed.

These could include improving charging infrastructure and

incentives for consumers to buy domestically produced EVs, in

line with the tax credits the United States Inflation Reduction

Act brought in. This could particularly apply to corporate

fleets, which make up 50-60% of purchases of new vehicles.

Auto suppliers have argued the bloc should set a clear

target of 70-80% for regional content, following the North

American model, to protect the 13 million people the sector

employs.

Then there is the issue of how to deal with potential U.S.

tariffs, as threatened by President Donald Trump.

BMW CEO Oliver Zipse said he would propose the EU lower its

standard car import duty for U.S. vehicles from 10% to 2.5%,

matching the U.S. rate currently applied to EU car imports.