Stellantis uses surplus plants in Europe as leverage to gain subsidies

Production deals: A recent war of words between Italian Prime Minister Giorgia Meloni and Stellantis CEO Carlos Tavares has brought focus towards Europe's one-time homegrown automakers, who have become global players ready to exploit the European Union's overcapacity of car factories to obtain better government deals.

Stellantis, created after the merger between French PSA Group, Italy's Fiat and US's Chrysler, accounts for virtually all of Italy's car production, meanwhile, Fiat's output has been falling as European sales have settled and Stellantis has shifted production to other countries in its growing global network. 

Stellantis' capacity utilisation rate at its European factories stood at 56 per cent last year, down from 64 per cent in 2019 and well below the 71 per cent rate at Volkswagen, according to GlobalData data. Automakers aim for at least 80 per cent capacity utilization.

Production Reality

Stellantis is using its excess production capacity for leverage in bargaining for subsidies and policy support from Rome and governments in other countries. In the United States, state and federal officials offered subsidies to persuade Tavares not to close a Jeep plant in Illinois, which will now be used to build a new midsize pickup truck that fills a gap in the company's US model lineup.

The world's third-largest automaker has so far allocated more European electric-vehicle production to France, Justin Cox, director of global production at GlobalData. 

The company's North American truck and Jeep SUV operations generate the majority of the group's profit. Stellantis will report 2023 financial results on Thursday.

"You can see why the Italians are upset ... Italy has got a hell of a lot to lose," Cox said. "All of their volume production is tied up with Stellantis."

On paper, France and Italy appear evenly matched within Stellantis' production system. Stellantis built 735,000 vehicles in France in 2023 and 7,50,000 in Italy.

But Stellantis is Italy's sole major automaker, while France can also lean on Renault and is bolstered by more planned future EV models. Italy's total automotive production stood at around 8,00,000 vehicles last year, versus 1.5 million units in France, according to AlixPartners.

Italian officials have demanded that Tavares rebuild Fiat production to 1 million vehicles a year. Meloni has criticized Stellantis' decisions in nationalistic terms.

 Carlos Tavares Vs Giorgia Meloni 

Meloni said in Parliament that the "alleged" merger that created Stellantis "actually disguised a French takeover." 

"It's no coincidence that the group's industrial choices take France's interests in a bigger consideration than Italian ones," she said. 

Carlos Tavares, who has made Stellantis one of the industry's most profitable companies, has countered that the automaker is "not afraid of the 1 million mark ... But let's not forget that it always (depends on) the size of the market."

Tavares and Chairman of Stellantis, John Elkann, have engaged in talks with the Meloni government. The company has said Rome must do its part to support the rise in output, give incentives for consumers to buy electric vehicles (EVs), lower energy costs and encourage the development of the EV charging network.

Earlier in February, Italy launched a new auto purchase incentive, worth 950 million euro ($1 billion) for this year.

Stellantis has been shifting production of cheaper vehicles to low-cost countries, assigning more expensive models to France or Italy.