Stellantis's Strategic Pivot: A Structural Reassessment of European Battery Manufacturing

Stellantis's retreat from its European battery ambitions is not a minor course correction but a fundamental strategic retreat, driven by severe financial strain and operational failure. The scale of the pullback is staggering, with the company booking charges of around €22.2 billion in the second half of 2025. This includes a preliminary loss of between 19-21 billion euros for the period, a figure that crystallizes the depth of the crisis in its electric vehicle push.

At the heart of this retreat is the definitive shelving of two major planned gigafactories. The company has now put an end to the Termoli, Italy, and Kaiserslautern, Germany, projects. This is the final, formal closure of a plan that had already been on life support for over a year. Work on both sites was initially put on hold in June 2024 as the company's battery partner, ACC, revised its strategy. The projects remained in limbo, with no commitment to the Termoli plant, until the Italian government withdrew its funding in September 2024. Now, after months of uncertainty, management has concluded the projects are "no longer profitable due to technical, financial and strategic difficulties".

This move is a direct symptom of a broader reassessment. The financial writedown dwarfs the cost of the factories themselves, signaling that the entire EV development trajectory was misaligned with the company's current reality. The operational failures at ACC's Douvrin plant, where rejection rates of between 15 and 20 per cent and production costs 20 to 25 per cent higher than Asian competitors have plagued supply, further eroded confidence. In essence, Stellantis is abandoning a costly, in-house battery build-out that was failing on multiple fronts.

The Operational and Financial Reality Check

The strategic retreat is grounded in a stark operational and financial reality. Stellantis's in-house battery ambition, embodied by the Automotive Cells Co. (ACC) factory in Douvrin, France, has proven unworkable. The plant is currently able to equip only around 1,000 vehicles per month with its batteries, a fraction of the scale needed to support a major EV push. This crippling output has directly caused delivery delays of up to eight months for key models like the Peugeot E-3008 and E-5008. The root of the problem is severe: internal data from November 2025 showed scrap rates of between 15 and 20 per cent, leading to production costs that were 20 to 25 per cent higher than those of Asian competitors. This combination of low yield and high cost makes the Douvrin operation fundamentally uncompetitive and financially unsustainable.

This failure is not an isolated incident but a symptom of broader European manufacturing challenges. The ACC plant's struggles mirror the well-documented ramp-up issues faced by other European battery startups, such as Northvolt, which also grappled with high scrap rates and costs before its insolvency. The European battery sector's promise of strategic autonomy is being tested by the harsh economics of scaling production, where achieving yield targets and cost parity with established Asian supply chains has proven exceptionally difficult.

In response, Stellantis is pivoting to a more pragmatic, capital-light approach. The company is focusing on improving efficiency at its existing French operations while simultaneously securing cheaper, more reliable supply through external partnerships. The most significant move is the €4.1 billion joint venture with CATL to build a new, carbon-neutral LFP battery plant in Zaragoza, Spain. This facility, targeting production by the end of 2026, is designed to support Stellantis's affordable BEV strategy and represents a direct shift away from the costly, in-house gigafactory model. It is a calculated bet on leveraging a proven Chinese technology leader to achieve the scale and cost advantages that the Douvrin plant could not. The company has also taken note of ACC's decision to halt the German and Italian gigafactory projects, signaling a full retreat from that costly path. The bottom line is that Stellantis is now betting on partnerships and efficiency gains to navigate the European battery landscape, rather than attempting to build it from scratch.

The New Strategic Path: Partnerships Over Vertical Integration

Stellantis's retreat from its own gigafactories is not a retreat from electrification, but a decisive pivot toward a new strategic model: partnerships over vertical integration. The company is now betting its entire 75 BEV target by 2030 on securing capacity through joint ventures, most notably the €4.1 billion joint venture with CATL for a new LFP battery plant in Zaragoza, Spain. This facility, with a planned capacity of up to 50 GWh and production starting by the end of 2026, is the cornerstone of a capital-light, externally-driven strategy. It represents a direct repudiation of the costly, in-house build-out that led to the scrapping of gigafactory plans in Germany and Italy.

This pivot prioritizes affordability and speed to market over the costly pursuit of full control. By leveraging CATL's scale and expertise in LFP technology, Stellantis aims to produce more durable and affordable battery-electric vehicles in the B and C segments. The strategic rationale is clear: it trades some operational autonomy for immediate access to a proven, cost-competitive supply chain. The construction of the Zaragoza plant, managed through a 50:50 joint venture, is already underway, with around 2,000 Chinese workers helping to build the site. This reliance on CATL's know-how-acknowledged by local industry leaders who admit they are "years ahead of us"-highlights the trade-off. Control is ceded for the speed and scale that Stellantis's own Douvrin plant could not achieve.

Yet, the company is hedging its bets on the EV timeline itself. Even as it invests in battery partnerships, Stellantis is simultaneously ensuring its internal combustion engine portfolio remains viable. The company has pointed to its investments in Euro 7-compliant GSE engines as a key measure to ensure these vehicles can continue to be used beyond 2030. This dual-track approach-aggressively pursuing affordable EVs through partnerships while securing the future of its combustion engine lineup-reflects a strategic calculus that acknowledges the uncertainty of European EV demand and regulatory timelines. The bottom line is a company that has learned the hard way that vertical integration in European battery manufacturing is a high-cost, high-risk gamble. Its new path is one of calculated outsourcing, where partnerships with established leaders like CATL are the engine for its electrification plan.

Catalysts and Risks: The Road Ahead

The success of Stellantis's new partnership-driven strategy now hinges on a narrow set of future events and its ability to manage persistent operational risks. The primary catalyst is the successful ramp-up of the €4.1 billion joint venture with CATL for a new LFP battery plant in Zaragoza, Spain. Targeted to start production by the end of 2026, this facility is designed to reach up to 50 GWh capacity and is the linchpin for the company's affordable BEV push. The project is already underway, with construction officially begun and around 2,000 Chinese workers helping to build the site. If this plant can deliver on its promise of cost-competitive, carbon-neutral batteries, it will provide the scaled supply needed to meet the company's 75 BEV target by 2030 and validate the entire strategic pivot.

Yet, a major risk looms from the company's own existing operations. The continued underperformance of ACC's French factory at Douvrin remains a critical vulnerability. With the plant currently able to equip only around 1,000 vehicles per month, it is a source of persistent delivery delays of up to eight months for key models. This crippling output and high scrap rate directly threaten the company's ability to transition its portfolio, even as it builds new capacity elsewhere. The risk is twofold: it strains the balance sheet further through ongoing losses and delays, and it undermines investor confidence in Stellantis's operational execution at a time when the company needs to demonstrate it can manage complex projects.

Ultimately, the company's ability to execute its 'Dare Forward 2030' plan is inextricably linked to securing affordable battery supply and regaining investor trust after a market-value rout of nearly €70 billion. The CATL joint venture is the bet to solve the supply problem. But the company must also show it can stabilize its internal operations and navigate the political and economic headwinds of European manufacturing. The path forward is clear in its outline, but its success will be determined by the company's capacity to deliver on these high-stakes catalysts while mitigating the very real risks that remain.