The Italian government is shifting €4.6 billion ($5 billion) in funding originally earmarked for the struggling automotive industry to the defense sector, according to reports from Italian media and the industry lobby Anfia, Bloomberg reports.
The funding, which was initially allocated for a project to bolster automotive supply chains in the country, has been removed from the budget document. This decision comes as the Italian auto industry faces a severe downturn, largely attributed to a slowdown at Stellantis NV, the global group that owns the Chrysler, Fiat, and Peugeot brands.
Car and van production in Italy is expected to plummet to less than 500,000 units this year, a significant drop from the around 750,000 units produced in 2023. This decline has also impacted Italian component manufacturers, who are experiencing difficulties alongside the German auto sector.
Prime Minister Giorgia Meloni’s government has clashed with Stellantis over its decision to shift production to countries with lower costs, as demand for electric vehicles (EVs) falters. EV sales across Europe have dropped by 2.6% this year, driven by reduced subsidies in major markets like Germany.
Meanwhile, Europe’s defense companies are experiencing a surge in demand as countries seek to replenish equipment sent to Ukraine and decrease their reliance on the United States. While European NATO members have committed to increasing military spending, the region’s defense sector remains fragmented.
Italy’s top defense group, Leonardo SpA, has expressed its desire to play a leading role in future consolidation of the industry. Italy holds a 30% stake in Leonardo.
