By Giuseppe Fonte and Giulio Piovaccari

ROME (Reuters) -Fiat-maker Stellantis on Tuesday presented an upbeat plan to revitalise its output in Italy, aimed at drawing a line under months of fraught relations with the government, but with production only set to grow from 2026.

The plan comes despite a grim outlook for the European automotive industry which is facing weak market demand, especially for fully-electric (EV) vehicles, uncertainties over regulation and increasing competition from Chinese manufacturers.

The world’s fourth largest carmaker by sales said it would keep all of its Italian factories open and boost output from 2026 thanks to the launch of new models.

For his part, Industry Minister Adolfo Urso, who hosted a meeting in Rome with representatives of Stellantis, suppliers and trade unions to discuss the plan, pledged to spend 1.6 billion euros ($1.7 billion) to support Italy’s automotive supply chain. Over one billion euros will be made available next year.

Rome does not intend to spend the state cash to subsidise the purchase of cars in 2025, as it did this year.

The plan ensures all Stellantis plants in Italy will have production allocations until 2032 and it will not require public funds for planned investments, Jean-Philippe Imparato, the chief of the firm’s European operations, told the meeting.

He added the automaker would invest 2 billion euros in Italy in 2025 alone. Stellantis is the sole major automaker in Italy, where it employs around 40,000 people.

The mood between Stellantis, whose brands also include Alfa Romeo, Peugeot and Jeep, and Italy’s right-wing government has rapidly improved following this month’s abrupt resignation of Stellantis CEO Carlos Tavares.

Imparato however said he could not commit to a long-term target to make one million vehicles in Italy, which had long been under discussion with Rome.

“If the market responds, we will meet all the figures we have in mind,” he said in a media briefing after the meeting. “I do not want make promises I cannot keep.”

Automotive output in Italy – both passenger cars and vans – is expected to fall below 500,000 vehicles this year, according to estimates from the FIM-Cisl union, from 751,000 in 2023.

PRODUCTION PLANS

The new Stellantis plan includes manufacturing at least two compact models at the Pomigliano plant in southern Italy, where the automaker will introduce its new ‘STLA Small’ platform from 2028, as well as extending production of the old Panda city car, Imparato told the meeting.

He also said the group aims to triple the expected production volumes at the Melfi plant in southern Italy by adding hybrid versions for the Jeep Compass, Lancia Gamma and DS7 – three of the mid-sized models scheduled for the facility.

Hybrid versions are also being considered for the new Alfa Romeo Stelvio SUV and the Alfa Romeo Giulia sport sedan — initially planned only as EVs — which will be manufactured in the Cassino plant, central Italy, from 2025 and 2026, Imparato said.

As demand for EVs remains soft globally, hybrid models are expected to sell in higher numbers.

($1 = 0.9522 euros)

(Reporting by Giulio Piovaccari in Milan and Giuseppe Fonte in Rome; Editing by Keith Weir and Mark Potter)

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