The group, which separated at the beginning of this year from former parent CNH Industrial, said its bus producing unit would apply for access to a so-called Development Contract with Italy's Ministry of Economic Development, as part of the country's National Recovery and Resilience Plan (PNRR).

The aim is to develop and manufacture zero- and low-emission buses in the country -- battery electric (BEV) and hydrogen fuel cell vehicles as well as latest-generation methane, biomethane, diesel and biodiesel ones -- it added, without providing financial details of the plan.

A source close to the matter told Reuters public funds could cover around 25% of the investment.

As part of the plan buses are expected to be assembled in Iveco's plant in Foggia, southern Italy, based on body frames and chassis supplied by other European facilities of the group, while engineering and manufacturing activities for electric batteries will be set up in Turin.

Other components will be "largely" supplied by Italian automotive part makers, Iveco said in a statement. Iveco last made buses in Italy in 2011.

Industry Minister Giancarlo Giorgetti said Iveco's plan was very good news for national manufacturing and evidence of Rome's efforts to support reshoring of key productions to Italy.

Iveco aims to start production of its first buses in Italy in spring of next year, subject to the acceptance of its application for a Development Contract, it said.

"This project will ... play a leading role in the urgently needed renewal process of Italy's fleet for local public transport," said Domenico Nucera, the head of Iveco bus business.

(Reporting by Giulio Piovaccari; Editing by Alison Williams)