The bloc's carmakers, who are struggling to compete against Chinese rivals and bracing for U.S. tariffs after President-elect Donald Trump takes office, face potential EU fines of as much as 15 billion euros ($15.4 billion) if their fleets do not meet CO2 emission limits in 2025.
Kaellenius, the new president of the European Automobile Manufacturers' Association (ACEA), set out an industry wish list ahead of a 'strategic dialogue' the EU executive plans with carmakers, suppliers and trade unions.
The dialogue is designed to support the competitiveness of automotive manufacturing in Europe, now facing job cuts.
Kaellenius said he expected the dialogue to start within weeks, adding that the EU should also seek a "grand bargain" with Trump to avoid a trade war.
The ACEA president said the CO2-emitting car targets were based on expectations of a take-off of EV demand that had not happened and urged political leaders to come up with ideas.
"We have made a few suggestions, but we didn't want to come in with a prescriptive 'just do this', but say, let's recognise there is an issue," he told reporters. "Any type of relief that protects our investment capability is what we're seeking."
ACEA said EV sales fell by 5.9% last year, with a market share of 13.6%, a percentage point down from 2023, rather than an increase to 20% to meet carbon emission targets. It forecast that market share would again fall short, risking high penalties for non-compliance.
New EU car registrations rose by 0.8%, according to the provisional ACEA figures, but the number of vehicles sold was still 18.4% below the level in 2019.
Kaellenius also said the EU needed to boost competitiveness, such as by deepening its single market and stimulating research, and recognise the benefits of free trade.
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