Stellantis is to halt production of the electric Fiat 500 model for four weeks because of a lack of orders in Europe.
The Franco-Italian company, which also owns the Citroën, Vauxhall and Peugeot brands, said production would be suspended from Friday.
A global slowdown in sales of electric vehicles (EVs), which has been partly due to differing policies on green incentives, has pushed carmakers around the world to adapt their EV plans.
Stellantis said: “The measure is necessary due to the current lack of orders linked to the profound difficulties experienced in the European electric [car] market by all producers, particularly the European ones.”
The fully electric Fiat 500, a small distinctive car, is made at the historic Mirafiori factory in Turin in north-west Italy, the birthplace of the brand.
Stellantis said it was “working hard to manage at its best this hard phase of transition”.
The company is investing €100m (£84m) in Mirafiori, which opened in 1939, to adopt a higher performance battery and will produce a hybrid version of the 500 model, starting between 2025 and 2026.
Unions have long urged Stellantis to revamp the site, where output has slumped in recent years, by building a new high-volume, cheap car there.
“The Mirafiori complex is undergoing a deep transformation, with the aim of making it a true global innovation and development site, a key choice if we are to meet the challenge of the transition to sustainable mobility to which we are called,” the company said.
Italy launched a $1bn plan to help drivers switch to cleaner vehicles this year, including subsidies for purchases of fully-electric cars. However, Rome and Stellantis have been at odds over the government’s approach to incentives.
There are fears of a tit-for-tat trade war with China, after the European Union imposed provisional tariffs on the import of Chinese EVs, ranging from 17.4% to 37.6%, in June. The two sides had failed to reach an agreement on what the European Commission called “unfair” subsidies from Beijing.
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In a sign of growing divisions within Europe, the Spanish prime minister, Pedro Sánchez, called on the EU to reconsider tariffs on Chinese EVs, saying it was important to find a “compromise” between the bloc and China.
“I have to be blunt and frank … I think we need to reconsider, all of us, not only member states, but also the [European] Commission, our position towards this movement. We don’t need another war, in this case a trade war,” Sánchez said during a visit to Kunshan near Shanghai on Wednesday.
China is a leading producer of electric cars, and take-up in the country has also soared. Between 2021 and 2022, electric vehicle sales in China increased from 1.3m to 6.8m – accounting for more than one-third of the world’s EV sales in the latter year. China is also the world’s biggest single carbon emitter.