PARIS (Reuters) -With Chinese automakers pushing into Europe, Stellantis ( STLA ) and Renault are lobbying for a new, less-regulated category of small cars with fewer safety features, making them cheaper to build.

Over the last two months, Stellantis ( STLA ) Chairman John Elkann and Renault CEO Luca de Meo have engaged in a rare public campaign to get the European Union to consider the matter.

The aim is to revive a small car segment largely abandoned by Europe's automakers as such models were unprofitable, a problem they blame on regulations that make the vehicles larger, heavier and more expensive.

Elkann last week said Europe needs its own version of Japan's "kei cars", small, urban vehicles with size and engine restrictions that enjoy lower tax and insurance costs - which he said could be called the "e-car".

"There's no reason why if Japan has a kei car, which is 40% of the market, Europe should not have an e-car," he said at an event in Turin, echoing similar comments in a joint editorial with Renault's de Meo published last month.

Though de Meo is set to leave Renault in July, the company is expected to maintain its support for the proposal.

"Small cars are a pocket of growth one cannot, and must not, ignore right now," said Francois Provost, Renault's director of procurement, partnerships, and public affairs.

Chinese rivals have so far focused on larger EVs and hybrids in their bid for market share in Europe, but smaller EVs are on the way.

The Dolphin Surf from China's BYD hit the market one month ago, priced from under 20,000 euros ($23,124) with features such as a rotating large touch screen and anti-steam rear mirrors.

By comparison, the Renault 5, which is similar though can carry one more passenger, costs almost 5,000 euros more when similarly equipped.

Facing that pressure, European manufacturers are examining the potential for cheaper cars to help them boost sales and achieve their CO2 targets, said Flavien Neuvy, auto analyst and head of research firm Cetelem.

"The market is down 20% compared with 2019, so there is not enough volume for everyone, and the Chinese are coming," he said.

Though small cars currently account for just 5% of the market, they made up as much as half the market in the 1980s, and the segment could rebound with more launches, said S&P Global, which estimates sales could reach 600,000 by 2030, up about 20% from last year.

'A LOT OF EXCUSES'

The lobbying effort targets the EU's General Safety Regulations 2 (GSR2), which mandates safety features such as side airbags, sensors detecting whether a driver is falling asleep, lane-crossing warning, and more thorough crash tests.

Such requirements and European rules on pollution add between 850 and 1,400 euros ($983-$1,607) to the cost of a car, estimates a source familiar with the lobbying.

Lobbyists argue there is no need for safety requirements like those for high-speed collisions when it comes to small cars designed for city drivers.

Backed by industry group the European Automobile Manufacturers Association (ACEA), they want an entirely new vehicle category called M0, or e-car.

The European Commission is looking into the matter, said spokesperson Lea Zuber.

Revamping requirements for smaller cars without compromising on safety will be complex and will not necessarily be implemented, said people familiar with the discussions.

And whether less-regulated models could compete against Chinese EVs also remains to be seen.

Matthew Avery, director of strategic development at Euro NCAP, which tests new cars for safety, said the idea that small city cars would not be involved in highway accidents is nonsense.

The Chinese are bringing cars to Europe that consistently get five-star ratings from Euro NCAP, said Avery. Although its ratings do not carry legal weight, consumers take them into account and many corporate fleets will not buy cars with less than five stars.

A change in regulations to cut some safety requirements could leave smaller European cars with two- or three-star ratings, Avery said.

"If they want to, they can de-spec a car for safety," Avery said, but noted Euro NCAP's tests and safety ratings will remain unchanged. "Our job is just to say, well, this car is safer than that car."

Emmanuel Bret, deputy head of BYD France, says the company will continue offering small cars that meet all current EU regulations and that blaming the bloc for making them unaffordable is just "a lot of excuses".

"Let customers choose," Bret said.

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