Electric vehicle boom forces Italian car parts maker to shut down factory

Company News

by Glenn Dyer


This is set to become a regular news item in the coming years—a major car parts manufacturer attributing the closure of a factory, or even multiple factories, to the rising popularity of electric vehicles (EVs), resulting in the loss of hundreds, if not thousands, of jobs.

Such is the case with the Italian parts maker Marelli, which has announced that the increasing sales of EVs have compelled it to close one of its 15 plants that produce components for internal combustion engines (ICEs).

The impact of rising costs for raw materials and energy has exacerbated the downturn in demand from ICE companies, including its former parent, Fiat (now part of Stellantis).

In Europe, surging sales of EVs are siphoning off market share from ICE vehicles. In July, EV sales in the EU surged by 61% compared to the previous year, capturing 13.6% of the monthly market (compared to 9.8% in July 2022), out of over 851,000 total monthly sales—a new record.

Battery EV sales in the EU for July alone exceeded 116,000 units, bringing the total for the first eight months of 2023 to nearly 820,000, with an estimated total exceeding 1.3 million for the entire year.

Marelli announced on Tuesday its decision to close one of its Italian plants that produce components for internal combustion engines (ICEs), citing the business as "unsustainable" due to the transition to EVs. The affected plant, situated in the town of Crevalcore in the northern Emilia Romagna region, currently employs approximately 230 people. It is responsible for manufacturing plastic components and processing aluminum components for ICEs.

The company attributed its decision to "the lack of new business due to the reduction of investments by automotive players in internal combustion engines," along with rising prices for raw materials and energy.

Marelli, owned by the US private equity group KKR, foresees further declines in volumes and revenues at the Crevalcore facility in the coming years, which would reduce its capacity utilisation rate to no more than 30%.

To mitigate the impact on affected workers, Marelli plans to relocate plastic component production to another Italian plant, while aluminum production will be outsourced to a third party.

Marelli, established in 2019 following the sale of Fiat Chrysler's car parts unit Magneti Marelli, stated that it is collaborating with unions and institutions to minimise the repercussions for affected employees. Earlier this year, the company reached an agreement with trade unions for the layoff of 400 employees across its 15 factories in Italy.

Glenn Dyer

Glenn Dyer has been a finance journalist and TV producer for more than 40 years. He has worked at Maxwell Newton Publications, Queensland Newspapers, AAP, The Australian Financial Review, The Nine Network and Crikey.

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