Stellantis Exploits Overcapacity of Car Factories in Europe for Better Government Deals

Europe's once-domestic automakers have transformed into global players, capitalizing on the European Union's surplus car factory capacity to secure favorable government agreements.

Stellantis, formed by the merger of France's Peugeot maker Peugeot PSA, Italy's Fiat, and Detroit's Chrysler, now accounts for most of Italy's car production. However, Fiat's output has dwindled due to stagnant European sales, leading Stellantis to shift production to other countries within its extensive global network.

Capacity Utilization Challenges

Last year, Stellantis experienced a capacity utilization rate of 56% in its European factories, a decline from 2019's 64% and significantly lower than Volkswagen's rate of 71%. Typically, automakers aim for at least 80% capacity utilization.

Republic World noted that Stellantis is leveraging its surplus production capacity to negotiate subsidies and policy support from the Italian government and other countries. In the United States, state and federal officials offered subsidies to dissuade Stellantis CEO Carlos Tavares from closing a Jeep plant in Illinois. The plant will now be repurposed to manufacture a new midsize pickup truck, filling a gap in Stellantis' U.S. model lineup.

As pointed out by q957, Stellantis has primarily allocated European electric vehicle production to France. While France and Italy appear evenly matched on paper within Stellantis' production system, Italy solely relies on Stellantis as its major automaker, in contrast to France, which benefits from Renault's support and has more planned future EV models.

Italy's Demands and Allegations

Italian officials have demanded that Tavares increase Fiat's production to one million vehicles annually. Italian Prime Minister Meloni accused the Stellantis merger of being a disguised French takeover. Stellantis has urged the Italian government to provide incentives for EV purchases, lower energy costs, and facilitate the development of an EV charging network.

According to AlixPartners, Italy's total automotive production amounted to approximately 800,000 vehicles in the previous year, while France produced 1.5 million units.

Italy recently launched a 950 million euro ($1 billion) auto purchase incentive for this year. Stellantis has been relocating the production of more affordable vehicles to low-cost countries while assigning pricier models to be manufactured in France or Italy.

Photo: Stellantis Newsroom