Stellantis at a Crossroads as EU Emissions Rules Tighten

Stellantis, the automotive giant behind brands like Peugeot, Fiat, Jeep, and Dodge, is entering a critical phase in Europe. Despite recent moves that hint at a renewed focus on performance with the revival of the SRT brand under Tim Kuniskis, the situation on the European front is far more precarious. Stellantis now faces the very real possibility of factory closures as it grapples with stringent regional CO2 emissions targets imposed by the European Union.

Why Stellantis Is Under Pressure

The EU’s aggressive climate agenda aims to significantly reduce greenhouse gas emissions from all sectors, including transportation. Under this regulatory framework, automakers are required to meet tough fleet-wide CO2 targets or face substantial financial penalties. Initially, these fines were set to be calculated based solely on 2025 data, putting extreme short-term pressure on manufacturers.

However, a policy adjustment made in May has somewhat eased the burden. Instead of measuring emissions solely in 2025, the new system allows automakers to average emissions performance over a three-year period from 2025 to 2027. This change is a partial win for the industry, giving carmakers more time to adapt, innovate, and shift production strategies.

Billions Still at Stake Despite Flexibility

Despite this relief, Stellantis remains far from safe. European division chief Jean-Philippe Imparato warned that even with the extended timeline, the targets remain “unreachable” under the company’s current production mix. He estimates that without significant changes, Stellantis could incur up to €2.5 billion (around $2.95 billion) in EU fines over the next two to three years.

That level of penalty could severely impact operations, prompting a tough internal debate about the future direction of Stellantis’ European strategy. Imparato laid out two stark options: either dramatically increase electric vehicle (EV) sales, or reduce production of internal combustion engine (ICE) models — the latter likely leading to the closure of several manufacturing sites.

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The Fate of Stellantis Factories

One of the factories under threat is the Atessa plant in Italy, which specializes in ICE vehicle production. A reduction or complete halt in ICE manufacturing as Stellantis pivots to electrification would render such facilities vulnerable to downsizing or outright shutdown.

Imparato made Stellantis’ position crystal clear during a recent appearance at the Italian parliament:

“I have two solutions: either I push like hell (on electric)… or I close down ICE. And therefore I close down factories.”

This statement underscores the intensity of the challenge. Electrification is no longer a long-term goal — it’s an immediate necessity, particularly for survival in Europe’s regulated automotive market.

EV Acceleration Is No Longer Optional

Stellantis must now ramp up its EV offerings across its European brands if it wants to meet emissions targets without slashing ICE output. While the company has already introduced several electric models, its current sales volume of EVs appears insufficient to offset the CO2 averages contributed by its gasoline and diesel vehicles.

Pushing electrification “like hell” would require not only a broader range of competitive EVs, but also aggressive pricing, marketing, and dealer-level incentives to capture consumer interest in a market where EV adoption is uneven across regions.

A Looming Turning Point for Stellantis Europe

Historically, Stellantis has leveraged its diverse brand portfolio and manufacturing footprint to remain competitive in both traditional and emerging markets. But the CO2 challenge may mark a pivotal moment in the company’s European strategy. Plant closures — which could affect thousands of jobs — would have social, political, and economic consequences, especially in regions like Italy, where auto manufacturing plays a major industrial role.

Unless EV adoption accelerates dramatically or regulatory conditions ease further, Stellantis could be forced into making painful decisions that alter the face of its European operations for years to come.