Stellantis STLAM.MI said on Thursday it will stop making new cars at its Poissy plant near Paris within three or four years, as it works on cutting excess manufacturing capacity across Europe.

The Jeep and Peugeot maker is facing chronic overcapacity in the region, where auto sales have yet to return to pre-pandemic levels.

Rapid gains by low-cost Chinese competitors as well as a slower-than-expected transition to electric vehicles, which forced Stellantis to report a $25 billion writedown earlier this year, have compounded the situation.

Production of the DS3 and Opel Mokka in Poissy should cease at the end of 2028 at the earliest, after which the site will no longer produce new vehicles, but will continue to manufacture auto parts for other Stellantis factories, a company spokesperson told Reuters following talks with unions.

During the meeting, Stellantis told unions that the date of end of production, penciled for the end of 2028, would be confirmed later on.

Stellantis, which has four other factories in France, will invest 100 million euros ($117.96 million) to overhaul the Poissy site, enabling new activities such as 3D printing for parts or reconditioning and recycling used vehicles.

The plant's future has been uncertain for years, with output dwindling and expected to come in at about 68,000 units in 2026 and 65,000 in 2027, well below 145,800 in 2023, said an industry source familiar with the matter.

Stellantis declined to comment on the volume forecasts.

The factory was built by Ford in the 1940s and later acquired by Chrysler before being taken over by Peugeot and becoming part of Stellantis in 2021. At its peak in 1976, the plant employed nearly 27,000 people and produced more than 500,000 vehicles annually.

Approximately 1,600 workers currently work at Poissy, a number expected to drop to 1,200 by 2030 due to the aging workforce. Around 1,000 new roles will be needed by 2030 to accommodate the new businesses, and a training programme implemented, said the spokesperson.

($1 = 0.8477 euros)

-Gilles Guillaume/Reuters