Stellantis' EV Transition: A Risky Gamble or the Future of Automotive?

The automotive industry's shift to electric vehicles (EVs) has become a battleground of corporate strategy, financial acuity, and raw survival. Nowhere is this clearer than at Stellantis, the Franco-Italian giant formed from the 2021 merger of Fiat Chrysler and PSA. As Stellantis moves to slash its Italian workforce—offering voluntary redundancies to up to 1,600 employees this year—the question is whether this restructuring is a necessary pivot to the EV era or a risky gamble that could deepen its operational and financial vulnerabilities.

The Anatomy of Restructuring: Mirafiori, Termoli, and Beyond

At the Mirafiori plant in Turin, 610 workers are being offered early retirement, part of a broader downsizing that has already reduced Italy's workforce by over 15,000 since 2021. Meanwhile, the Termoli plant is targeting 200 redundancies, with production lines for combustion engines like the FIRE and Nettuno V6 already shuttered. The stated goal is clear: shed older workers to hire younger, tech-savvy talent capable of supporting hybrid and EV production, such as the hybrid Fiat 500, set for full-scale production by November 2024.

This workforce overhaul aligns with Stellantis' €30 billion R&D investment through 2025, targeting 75 battery-electric models by 2030. But the execution is fraught with challenges. The Termoli gigafactory, intended to produce next-gen batteries, has been delayed until late 2025 due to high energy costs and tepid EV demand. Even its planned hybrid transmission line (eDCT) will employ just 300 workers by 2026—far fewer than the current workforce. Unions, like the FIOM labor group, decry the strategy as a “silent disengagement,” arguing that Stellantis is underinvesting in Italy compared to rival projects in Spain, where governments are subsidizing EV factories.

Risks: A Perfect Storm of Labor, Cash, and Competition

The risks here are existential. First, labor tensions could escalate. Offering early retirement to older workers may ease near-term costs but risks alienating unions, which have already staged strikes over job cuts. Second, Stellantis' financials are strained: net profit plummeted 70% in 2024 to €5.5 billion, while negative free cash flow hit €6 billion, exacerbated by overstocked inventories and production gaps.

Third, the company faces fierce competition. Tesla's Model Y and BYD's all-electric lineup are siphoning market share, while European rivals like Renault and Volkswagen accelerate their EV launches. Stellantis' hybrid dominance—its current strength—may not be enough to offset these threats if EV demand surges faster than expected.

Growth Potential: EV Demand and Hybrid Leverage

Yet Stellantis is not without advantages. The global EV market is projected to grow at a 21% CAGR through 2030, driven by regulatory mandates and consumer preference shifts. Stellantis' hybrid expertise, particularly in Europe, could be a bridge to this future. The hybrid Fiat 500, for example, offers affordability and emissions compliance that resonate in markets still wary of battery-only vehicles.

Moreover, the company's scale—spanning brands like Jeep, Ram, and Peugeot—gives it the leverage to mass-produce EVs at lower costs than niche players. Its partnership with Samsung SDI on in-house batteries could also reduce reliance on volatile global supply chains, though this depends on resolving the Termoli gigafactory's delays.

The Investment Crossroads: Buy, Hold, or Bail?

Investors face a dilemma. On one hand, Stellantis' strategic moves—workforce realignment, R&D focus—are essential for survival in an EV-dominated world. On the other, its execution risks loom large. The stock, down 25% year-to-date, trades at 4.5x EV/EBITDA, a discount to peers like Tesla (20x) and BYD (25x), reflecting skepticism about its ability to turn margins.

For now, the safer bet is to hold Stellantis stock. The company has no choice but to adapt, and its scale and brand portfolio provide a foundation for recovery. But investors must demand two critical turning points: 1) a greenlight for the Termoli gigafactory and 2) signs of rising EV demand in Europe and the U.S. (e.g., U.S. EV tax credit uptake post-2024).

If Stellantis fails to deliver on these, it risks becoming a laggard in a market where Tesla and BYD are already defining the future. For bulls, this is a “turnaround” story—but only if the restructuring pain translates into tangible progress. Until then, proceed with caution.

Final Recommendation: Hold Stellantis stock, but wait for confirmation of the gigafactory's revival and stronger EV demand signals before increasing exposure. The stakes are high, but so are the rewards for a company that once dominated the automotive world.