China's growth prospects combined with Western firms' fear of being shut out of the world's largest auto market are leading to a shift in attitude toward Chinese rivals buying into Europe's auto sector.

Takeovers by Chinese buyers were often stymied by European targets' refusal to sell, three bankers familiar with the auto sector told Reuters, and European makers sought to differentiate themselves from Korean and Chinese rivals with premium high technology offerings.

Chinese acquisitions of key technology companies in Europe remain the exception and not the rule, the bankers said.

So far, the sale of European assets to Chinese companies has happened on terms set by the Europeans, or after European buyers declined to make an offer. That way Geely (0175.HK) was able to snare Volvo, and Nanjing Auto bought the UK's Rover.

But the Chinese market's meteoric rise to the world's No. 1 spot has led Europe's auto sector to focus less on defending their home turf against Chinese incursion, and more on maintaining access to Asia through good relations with joint venture partners, one of the bankers said.

"It's early days yet, but we could see a large deal involving a European auto supplier," one banker active in the auto sector, who declined to be named, said.

How sensitively the European auto sector reacted to acquisitions by outsiders was demonstrated when Volkswagen (VOWG_p.DE) Chairman Ferdinand Piech threatened to cancel all of the group's contracts with Magna if the Canadian auto supplier bought General Motors' (GM.N) German-based Opel unit.

General Motors ended up keeping Opel.

More recently, Chinese companies have been able to strike deals that only a few years ago would have seemed unthinkable.

"One cannot afford to ignore Chinese investors, given the size of the Chinese market," said Robert Clausen, an investment banker with BNP Paribas.

"We see a trend whereby investors from China or India will play a bigger role in (auto sector) M&A," Clausen said.

CHINESE DECISIVENESS

The speed with which China's Wanhua took control of Hungarian auto supplier BorsodChem BDCD.UL in February showed a new level of decisiveness on the part of Chinese companies as they seek access to key Western technologies, one of the bankers said.

Borsodchem, a maker of resins and specialty chemicals used in the automotive and electronics industry, went through financial restructuring in June last year, giving China's Wanhua an opportunity to take a 38 percent stake before clinching full control in February this year.

Earlier this month, Chongquing Light and Textile struck a deal to buy insolvent Saargummi, a supplier of auto body seals and mouldings, for around 130 million euros ($185.4 million).

In other deals, China's largest listed car distributor, Pangda Automobile Trade Co Ltd (601258.SS) has come to the rescue of Saab, and Preh, a maker of vehicle electronics, was sold to China's Joyson automotive.

As European auto suppliers and auto makers seek to expand in China, they need to work with a local joint venture partner, a factor that makes it difficult for European companies to shut the door when Asian buyers come shopping in Europe.

Creating further pressure to maintain good relations, China is now showing signs of becoming more protective of its market.

This month, China said it found some U.S.-made passenger cars benefited from unfair subsidies, damaging domestic carmakers.

But with growth in China set to continue, resistance to Asian buyers has softened.

Car sales in China jumped 33.2 percent in 2010, and according to a KPMG study, Germany exported more than twice as many cars to China than a year earlier.

Growth in China is seen slowing this year, but prospects for premium automakers remain bright, BernsteinResearch said in a report published in April, echoing upbeat comments from companies such as Daimler (DAIGn.DE) and BMW (BMWG.DE).

German premium auto sales in China rose almost 100 percent in 2010, and premium auto sales penetration as a percentage of overall vehicle sales there are still 30 percent below the world average, leaving some room to expand, BernsteinResearch said.

(Reporting by Edward Taylor and Alexander Huebner; Editing by Will Waterman)