BRUSSELS (Reuters) - The European Commission will present measures next week meant to boost demand for electric vehicles (EVs) in the European Union, and envisages local content requirements for car battery production, according to a draft of the proposals.

The EU executive will publish its automotive action plan on March 5 to help ensure EU car producers can electrify their fleets and compete with more advanced Chinese and U.S. rivals.

The draft, seen by Reuters on Friday, will make proposals to the 27 EU member states on actions they can take to accelerate the uptake of EVs in fleets of company cars, which comprise about 60% of the bloc's market in new cars.

It will also work with EU countries to assess how best to incentivise EV purchases and funding options for them, and is proposing that zero-emission heavy vehicles should be exempt from road charges.

New EV sales fell 5.9% in 2024, according to EU automakers' association ACEA, which says limited charging infrastructure was partly to blame. Germany's abrupt ending of subsidies and a shortage of cheap EVs until now have also contributed.

The Commission's draft paper recognises that the European automotive industry is at risk of losing market share in EV technology and faces significant higher costs relative to competitors in EV components, notably batteries, which account for 30-40% of the value of a typical car.

The draft says that there will be increasing European content requirements on battery cells and components sold in EVs in the European Union. 

The EU executive will also look into support for companies producing batteries in the EU. This could be available to foreign firms as well as long as they are in partnership with EU companies to allow sharing of expertise and technology. 

The Commission plans to propose conditions for inbound foreign investments in the automotive sector. It will also look into financial support for battery-recycling facilities. 

EU carmakers, hit by factory closures and now bracing for U.S. tariffs, have urged the Commission to grant relief from fines they say could rise to 15 billion euros ($15.6 billion) if their fleets do not meet CO2 emission limits in 2025. 

The draft paper left open what the Commission might offer by way of financial relief.

Julia Poliscanova, senior Director of vehicles and e-mobility at campaign and research group T&E, said this was "the elephant in the room" and targets were the main measure to help Europe catch up with China by driving producers to electrify.

"Instead of creating uncertainty, the plan should stick to the promising measures on electrifying corporate fleets and localising battery manufacturing," she said.

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(This story has been refiled to remove garble in paragraph 2)