UPDATE 2-German car industry urges Merkel to help promote electric cars

* Merkel met auto chiefs over incentives for electric cars

* Auto bosses say Germany lags rival countries

* Subsidy is controversial within coalition government

* German economics minister: Incentives decision by March (Adds comments from Audi labour boss)

By Edward Taylor and Andreas Cremer

FRANKFURT, Feb 3 (Reuters) - Germany needs incentives to boost demand for electric cars if it is to retain its leading edge as an automotive market, industry bosses said on Wednesday, a day after a high-level meeting with Chancellor Angela Merkel ended without a deal on subsidies.

Merkel summoned auto bosses to discuss promoting electric and hybrid cars following increased political pressures in the wake of Volkswagen’s admission that it cheated U.S. emissions tests for diesel-powered cars.

Germany lags markets such as Norway and the Netherlands, when it comes to subsidies and providing charging points for electric cars in particular, said the country’s VDA industry association.

“In its development into a leading market, Germany still has some catching up to do,” Matthias Wissmann, president of the VDA said in a statement.

Premium carmaker Audi’s top labour representative echoed the VDA’s view and called for government action to set up charging stations for electric cars and help fund sales subsidies.

“Clear messages are important and needed now. Otherwise we will sleep away the future,” Peter Mosch said.

German economics minister Sigmar Gabriel said the auto industry and politicians would continue to discuss proposals and seek to find a solution on incentives by March.

German automakers have for years relied on a recipe of selling larger, more powerful cars to please autobahn cruising clients, a strategy which has boosted the profits of its premium carmakers Daimler, BMW and VW’s Audi.

As a result, Chinese and Japanese rivals including BYD and Toyota have stolen the march on German carmakers in terms of sales of zero-emission vehicles.

BMW, Mercedes-Benz and Audi now rank 12th, 14th and 22nd respectively in terms of global sales of hybrid and electric vehicles, data from LMC Automotive shows.

Germany is also set to fall far short of its goal to put 1 million electric cars on the roads by 2020, as drivers are reluctant to switch from more-polluting, but also generally cheaper, diesel and petrol vehicles.

So far only around 50,000 electric and hybrid cars have been registered in Germany, Europe’s biggest car market.

In response, German auto bosses and politicians organised a closed-door summit to discuss measures to help boost the number of low-polluting cars in the country.

The heads of the three parties in Merkel’s ruling coalition have considered introducing a subsidy worth up to 5,000 euros ($5,500) for electric car buyers. But Finance Minister Wolfgang Schaeuble, a senior member of Merkel’s centre-right party, has spoken against such a move.

Under the proposal being discussed, carmakers may contribute between 1,500 and 2,000 euros of the incentive, which would be paid into a common fund, the weekly news magazine Der Spiegel reported, without citing sources.

This so-called buyers’ premium, combined with other incentives such as preferential parking and the use of special lanes, have helped boost sales of electric cars in markets such as Norway.

While Germany saw deliveries of plug-in and hybrid electric cars jump 80 percent last year to 23,500, China saw registrations more than double to 188,000, while U.S. registrations reached 115,000, according to Stefan Bratzel at the Center of Automotive Management in Bergisch Gladbach.

Toyota is the biggest seller of hybrid and electric vehicles, data provided by LMC Automotive shows. It sold 982,968 such vehicles last year, followed by Honda and Lexus which sold 258,127 and 129,578 low-emission cars respectively. (Additional reporting by Gernot Heller and Jan Schwartz; Editing by Greg Mahlich and Mark Potter)