Stellantis and Italian Government Clash Over Car Production and Subsidies
A heated dispute has erupted between Italian Prime Minister Giorgia Meloni and Stellantis CEO Carlos Tavares, revealing a new reality for European automakers.
Once reliant on the domestic market, these automakers have now become global players, leveraging the European Union’s surplus of car factories to secure better deals from governments.
Stellantis, the result of a merger between France’s Peugeot PSA, Italy’s Fiat, and Detroit’s Chrysler, is responsible for the majority of Italy’s car production.
With falling sales in Europe, Stellantis has shifted production to other locations within its global network.
According to data from GlobalData, Stellantis’ capacity utilization rate at its European factories was only 56% in 2023, significantly lower than Volkswagen’s rate of 71%.
In an effort to secure subsidies and policy support, Stellantis is utilizing its excess production capacity as leverage with governments.
In the United States, officials offered subsidies to persuade Tavares not to close a Jeep plant in Illinois.
This plant will now be used to produce a new midsize pickup truck, filling a gap in the company’s U.S. model lineup.
However, Stellantis has faced criticism for allocating more European electric-vehicle production to France, rather than Italy.
The company’s North American truck and Jeep SUV operations generate the majority of its profit.
Stellantis’ 2023 financial results are expected to be reported on Thursday.
Italian officials have demanded that Tavares rebuild Fiat production to 1 million vehicles per year.
Prime Minister Meloni has criticized Stellantis’ decisions, claiming that the merger actually disguised a French takeover and prioritized France’s interests over Italy’s.
Tavares has responded by stating that Stellantis is not afraid of reaching the 1 million mark, but it ultimately depends on the size of the market.
Tavares and Stellantis Chair John Elkann have engaged in talks with the Meloni government.
The company has called on Rome to support increased output by offering incentives for consumers to purchase electric vehicles, lowering energy costs, and encouraging the development of the EV charging network.
Italy recently launched a new auto purchase incentive worth €950 million ($1 billion) for this year.
Amidst growing concerns, it is clear that Italy has limited leverage over Stellantis’ decisions.
The company, as a global group, makes industrial choices based on global rather than national preferences.
Stellantis and its European rivals are now facing weakening car demand and intensified competition, particularly from Chinese automakers offering electric vehicles at prices European manufacturers struggle to match.
Italy, as the EU’s third-largest economy, houses the second-largest auto parts industry in Europe.
However, many of its suppliers specialize in combustion-engine technology and are still exposed to it.
The “brain” functions of Stellantis, such as engineering, R&D, and platform design, have gradually moved away from Italy since the merger, as PSA was already ahead in developing electric vehicles compared to Fiat-Chrysler.
France, which holds a 6.1% stake in Stellantis, has a representative on the board.
Italy does not have a presence in the group, but there have been discussions about Rome potentially buying a stake.
Sales also play a role in the imbalance between Italy and France, as Italy lags behind in the adoption of electric vehicles.
To address these concerns, experts suggest shifting the focus of discussions to practical solutions, such as convincing Tavares to relocate some EV-related R&D and product development functions to Turin, where the necessary skills are still abundant.
In the face of this clash, it remains to be seen how the Italian government and Stellantis will reconcile their differences and navigate the challenges that lie ahead.
Analyst comment
Neutral news.
As an analyst, Stellantis will likely face pressure to address Italian concerns and potentially reach a compromise with the government. The company may consider increasing production in Italy and allocating more electric vehicle production to the country. However, Stellantis may also prioritize global market demands and competition from Chinese automakers.
