MILAN (Reuters) -Vehicle production by car maker Stellantis in Italy fell by 37% last year, hit in particular by a steep plunge in car manufacturing, union figures showed on Friday.

To address overcapacity in Italy, the group has relied heavily on state-funded temporary layoff schemes. Stellantis in December presented a plan to boost production, but an increase is only expected from 2026 thanks to the launch of new models.

The FIM-CISL union said Stellantis, which was created in 2021 from the merger of Fiat Chrysler and France's PSA-Peugeot, last year manufactured 475,090 vehicles in Italy, down from 751,384 in 2023.

Production of cars in particular shrank by 46% to the lowest since 1956, while output of new commercial vehicles fell 17%.

Stellantis was not immediately available for comment.

Like its European peers, the world's fourth-largest car maker is wrestling with weak demand, especially for fully electric vehicles, regulatory uncertainty and tough Chinese competition.

FIM-CISL said it would join a protest planned in Brussels by labour organisation IndustriALL Europe on Feb. 5, two weeks before the European Commission presents its "clean industrial deal".

The union's leader Ferdinando Uliano said it was important to review EU targets for vehicles' carbon emissions reduction due to kick in from 2025.

"This is a battle for Europe," Uliano said, speaking about the crisis facing the European car industry. "Single countries can only lose."

Stellantis operates five car plants in Italy plus a facility for commercial vehicles.

Production at the group's Mirafiori plant in Turin fell by 70% last year. Only the Maserati plant in Modena, the heart of Italy's 'motor valley', performed worse with a 79% drop.

"We are very worried about Maserati," Uliano said. "We expect quickly a clear and detailed project for Maserati."

Stellantis in December pledged to invest 2 billion euros ($2.1 billion) in Italy in 2025 to produce new models at some of its plants in the country.

($1 = 0.9709 euros)

(Reporting by Giulio Piovaccari and Valentina Za; Editing by Alessandro Parodi and Jan Harvey)