July 8 (Reuters) - Brussels is considering pursuing a

potential arrangement that would allow European automakers that

produce and export cars from the United States to import

vehicles from the EU at reduced tariff rates, according to two

sources familiar with the matter.

The discussion is part of the European Commission's efforts

to broker a trade deal with U.S. President Donald Trump and

would replace the hefty 25% tariff on car and car part imports

the U.S. administration implemented in April.

This would be a clear positive for those carmakers with

major U.S. production facilities, who would be able to use their

U.S. production to lower their exposure to tariffs.

This is what a trade deal means for the EU and how

individual European automakers would be affected:

WHAT'S AT STAKE FOR EU?

According to data from European auto association ACEA,

nearly 758,000 cars worth 38.9 billion euros ($45.55 billion)

were exported to the U.S. from Europe in 2024, more than four

times as many as in the other direction.

One EU diplomat said cars were a "red line" for the bloc,

making a concession on cars a caveat of any deal. However,

Brussels and Washington have conflicting goals as Trump wants to

revive U.S. auto production while Brussels wants open markets

for its sector, which is struggling with high energy costs and

competition from China.

WHO STANDS TO WIN?

Germany's BMW and Mercedes-Benz would

benefit most from a mechanism counting U.S. exports against

imports from the EU, as both companies operate large factories

in the United States.

BMW, for example, exported around 225,000 vehicles produced

at its Spartanburg, South Carolina, plant in 2024, while it sold

around 400,000 autos in the U.S. market. It imported around

175,000 autos from other markets, less than what it exported.

Mercedes-Benz exports around two thirds of the vehicles it

makes at its plant in Tuscaloosa, Alabama, or around 170,000

based on 2024 production.

It sold around 324,528 vehicles in the United States last

year and imported around 235,000 from other countries.

WHO WOULD BE THE LOSERS?

Volkswagen, Europe's biggest carmaker, would not

benefit, as it mostly sells cars produced at its Chattanooga,

Tennessee, plant locally rather than exporting them.

An industry source said for that reason, there has also been

a push to get Washington to agree to investment credits, which

would support foreign automakers' plans to expand to boost local

production.

Volkswagen, for example, is currently deciding whether to

localise production of its Audi brand - which imports all of its

cars into the U.S. market - either via a new factory or

expanding existing sites.

Porsche would also see no benefit: it has no

local production and imports all of its cars from Europe.

LITTLE IMPACT FOR STELLANTIS

Stellantis ( STLA ), the world's No. 4 automaker, owner of

brands including Jeep, Ram and Chrysler, would not be seriously

affected by such an arrangement.

Stellantis ( STLA ) operates a number of U.S. plants, mostly serving

the local market, while import and export flows of its cars

between the U.S. and the European Union have historically been

very low - typically small volumes of U.S.-made trucks versus

European-made models from the Alfa Romeo, Maserati and Fiat

brands.

The group is far more vulnerable to any U.S. tariffs on

Mexico and Canada, as it manufactures around 40% of its North

American vehicles in those two countries, particularly in

Mexico.

CLEAR LOSS FOR VOLVO CARS

Volvo Cars is one of the most exposed European

automakers to U.S. tariffs, as most of the cars it sells there

are imported from Europe. The U.S. accounted for 16% of group

sales last year.

The company has said it will expand production at its

Charleston, South Carolina factory, adding a new model alongside

the electric EX90 that is currently made there.

Volvo has said the new vehicle would most likely be a

plug-in hybrid mid-sized SUV, a popular option with U.S.

consumers.

Last year Polestar, which like Volvo Cars is part

of China's Geely group, started producing the Polestar 3 SUV at

the Charleston plant to avoid hefty U.S. tariffs on Chinese-made

cars.

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