* U.S. ambassador to Germany talked to car bosses
* Brought up that U.S. could abandon tariff threats - source
* Merkel says common EU position needed, talks ongoing (Adds comments by U.S. embassy in Germany, share prices)
By Markus Wacket
BERLIN, July 5 (Reuters) - German Chancellor Angela Merkel said on Thursday she would back lowering European Union tariffs on U.S. car imports, responding to an offer from Washington to abandon threatened levies on European cars in return for concessions.
However, she added EU tariff negotiations required a "common European position and we are still working on it."
U.S. President Donald Trump threatened last month to impose a 20-percent import tariff on all EU-assembled vehicles, part of a tough line on trade that has raised tensions across the world and which could upend the EU industry's current business model for selling cars in the United States.
The U.S. ambassador to Germany, Richard Grenell, has repeatedly met with executives of German carmakers Volkswagen (VW), BMW and Daimler and automotive suppliers including Continental, most recently on Wednesday, to discuss the issue.
An industry source told Reuters earlier that Grenell had mentioned to the executives that Trump could abandon his threats if the EU scrapped duties on U.S. cars imported into the bloc.
A spokesman for the embassy said no formal offer on tariffs had been made, and that Grenell's goal was rather to explore the options for a wider transatlantic trade agreement.
"That is an ongoing process," the spokesman said.
VW, BMW, Daimler and Continental declined to provide details of Wednesday's discussion with Grenell.
Automotive stocks rose nonetheless on Thursday, on hopes that U.S. tariffs may not come after all. At 1330 GMT, shares in VW, BMW and Daimler were all up 4 percent from Wednesday's close. Continental was 2.5 percent higher.
Merkel said any move to cut tariffs on U.S. vehicles would require reductions on those imported from other countries to conform with World Trade Organization rules.
"I would be ready to support negotiations on reducing tariffs, but we would not be able to do this only with the U.S.," she said.
German automotive trade body VDA said any suggestions about mutually removing tariffs and other trade barriers were positive signals.
"But it is clear that the negotiations are exclusively being held at a political level," it said in a statement.
Trump's protectionist trade policies, which also target Chinese imports, have raised fears of a full-blown and protracted trade war that threatens to damage the world economy. (Additional reporting by Andreas Rinke, Joseph Nasr, Thomas Escritt, Sabine Wollrab and Irene Preisinger; Writing by Maria Sheahan; Editing by Sabine Wollrab and Mark Potter)