TURIN (Reuters) -Stellantis ( STLA ) Chairman John Elkann on Tuesday warned the European auto industry risks an "irreversible decline" if the European Union does not soften its stance on cuts in carbon emissions to grant automakers more flexibility.

The European Commission is due to present a package of proposals for its scheduled review of EU carbon emissions regulation for the auto industry on December 10.

Speaking in Turin, the home city of the Fiat brand, Elkann said the auto industry had drawn up a package of proposals to give automakers more flexibility on emissions targets, and that this would allow the sector to avoid the feared decline.

"There is another way to cut emissions in Europe in a constructive and agreed way, restoring the growth we have lost and people's needs," Elkann said during an event marking the start of production of the new hybrid version of the Fiat 500 small car.

Proposals from the industry include allowing plug-in hybrids, range extenders and alternative fuels beyond 2035, averaging 2030's interim carbon reduction goals over several years, introducing a wide vehicle scrappage scheme and adapting regulation to favour small car production.  

STELLANTIS SEEKS TO REVIVE ITALIAN OUTPUT

Introduced in 2020 as a purely electric vehicle (EV), the new hybrid Fiat 500 is one of the models Stellantis ( STLA ) is betting on to reverse a decline of its Italian output, due to a mix of factors including low demand, especially for EVs, and competition from Chinese manufacturers.

Car registrations in Europe amounted to around 13 million units last year, still below a 15.8 million unit pre-Covid level in 2019.

New Stellantis ( STLA ) CEO Antonio Filosa said talks with European authorities had been long and in-depth but now the industry needed "urgent and definitive action".

"If we are allowed to win back customers with excellent products such as the 500 hybrid, we will certainly be able to restore the growth that is essential for future investment and innovation ... supporting employment in Europe," Filosa said during the event.

The Stellantis ( STLA ) top management did not elaborate on possible consequences that tough European rules could have for the auto industry.

Earlier this year, the group's former Europe chief warned Stellantis ( STLA ) might have to close factories due to the risk of hefty EU fines linked to CO2 emission targets.

Gianluca Ficco of the UILM union said the EU needed to change rules for the auto industry, "before it's too late", to avoid tough consequences for the industry and jobs.