Stellantis Milano Production Strategy: Cost & Profitability

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Stellantis Milano Production Strategy
Stellantis Milano Production Strategy

Carlos Tavares, the head of Stellantis, defends the company’s choice to produce the new Milano in Poland, despite its Alfa Romeo branding. According to Tavares, manufacturing the crossover in Italy would have incurred an additional cost of €10,000 (approximately $10,700) per unit.

When evaluating this cost difference, it’s important to consider the context of labor wages. Poland boasts a minimum wage of 4,250 zlotys, equivalent to just under 1,000 euros. In contrast, Italy lacks a minimum wage law, potentially contributing to higher production costs.

The absence of a minimum wage law in Italy has led to a significant proportion of working poor individuals within the country. With the starting price of the Alfa Romeo Milano at €29,900, an additional €10,000 would push it to €39,900, making it less competitive within the subcompact crossover market.

Stellantis Milano Production Strategy
Stellantis Milano Production Strategy (Credit: Alfa Romeo)

Tavares emphasizes the importance of maintaining competitiveness in the marketplace. Despite facing opposition from Italian unions and the government regarding production volume and electric vehicle subsidies, Stellantis made the strategic decision to manufacture the Milano in Poland.

Additionally, Tavares revealed that Stellantis opted against selling Alfa Romeo and three French brands, including Citroen, Peugeot, and DS. This decision was influenced by Alfa Romeo’s operating profit of 500 million euros in 2023, demonstrating the brand’s potential for profitability under Stellantis ownership.

Stellantis’s decision to produce the Milano in Poland aligns with its commitment to cost-effectiveness and market competitiveness, reflecting a strategic approach to manufacturing and brand management.

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