The threat to the Italian heritage in car manufacturing
Rome faces choice over how to handle the transition to electric vehicles
As products linked to the Italian identity go, the Fiat 500 is right up there with fashion and food. So when Carlos Tavares, the chief executive of Stellantis — which now owns the Fiat brand — issued a warning over the future of the car’s production in Italy, there was a backlash in the country.
Tavares raised doubts over the Fiat factory in Turin, home to the company’s founding Agnelli family, and a plant near Naples if Giorgia Meloni’s government refused to further subsidise electric vehicles. “If you don’t give subsidies to purchase EVs, you are putting at risk the Italian plants,” he told Bloomberg.
The prime minister had previously criticised Stellantis in parliament of working, saying: “If you want to sell a car on the international market by advertising it as an Italian jewel, then that car must be produced in Italy.” The spat comes ahead of a crucial EU parliamentary election in June as the impact of the bloc’s 2050 net zero targets on jobs and industries takes centre stage across the continent.
The Paris-based carmaker, created in 2021 from the merger between Italy’s Fiat-Chrysler and France’s PSA, seemingly backtracked last week in a bid to ease tensions with Rome and unions. “The [Fiat 500] will always be linked to the city of Turin which should be considered [its] home,” the group said after a meeting with unions and local authorities. The root cause of the issue, however, remains unsolved.
Stellantis wants to sell a total of 5mn EVs a year by the end of the decade. In the first half of 2023, it sold 170,000. If European car manufacturers are to reach their ambitious goals — in line with the EU’s decarbonisation targets which includes a ban on combustion engines by 2035 — and fend off competition from China, industry experts say that they should focus on affordable small electric cars priced between €12-€15,000.
Stellantis says that it is impossible to produce EVs with such a price tag in continental Europe. The retail price of the electric version of the Fiat 500 — once known as the “people’s car” is priced about €30,000 before subsidies. The group has also recently released a new electric version of its historic Topolino model. The minicar, with a maximum speed of 45km/h, does not require a driver’s licence and sells for €9,800 and upward.
The government envisages higher EV subsidies for households earning up to €30,000, the national average. In general Italian EV subsidies in 2023 ranged from €2,000 to €7,500 — depending on emissions and the car’s price tag — and were less generous than some other European nations.
Reports have suggested Stellantis could begin producing the low-cost models of its new Chinese partner Leapmotor in Turin by 2026 or 2027, increasing the group’s overall Italian production.
For the time being, the cheapest EV in Italy is one produced in China by the Romanian car company Dacia, which costs around €21,400. Yet, out of the meagre 66,679 electric cars sold in 2023 (under 20 per cent of total car sales), the most popular model among Italians was the Tesla Y, which costs more than €42,000 before subsidies That raises the question of how much more generous subsidies would lift sales.
One obstacle is the lack of charging infrastructure across the country, especially in the south, which is problematic during long journeys. Plus, battery recharging is time consuming and costly (Italy has the third highest household electricity price in the world).
But there’s also another crucial issue: Italy and Fiat were latecomers to the EV market and the national manufacturing industry has been slower than its peers in shifting component production from combustion engines to electric ones. A PwC report published in July shows that close to 40 per cent of the largest 350 domestic suppliers to the automotive industry exclusively produce components for combustion engine vehicles. The report also showed the profit margins of the suppliers had taken a hit in the last three years as a result of the Covid pandemic, raw material shortages and supply chain issues.
Such a backdrop is a challenge for the likes of Stellantis to meet its own 2030 targets and comply with the EU’s ban on the 2035 combustion engine. The appeal of looking to source cheaper production elsewhere must be tempting.
If Rome wants to secure national jobs and salvage its car manufacturing industry, it might face a choice: is it better to subsidise EV sales more or to steer greater public investments into EV infrastructure and supporting the automotive supply chain transformation?