He will be replaced by Giancarlo Boschetti, managing director of IVECO, Fiat Group's heavy truck and bus manufacturing subsidiary.
Testore has been head of Fiat Auto since February 1996. He succeeded Paolo Cantarella, who at the end of 1995 was promoted to managing director of the Fiat Group.
Testore had replaced Cantarella once before, when he became head of Fiat Group's Comau robot subsidiary after Cantarella took over Fiat Auto in late 1988.
Fiat Auto has lost € 1.35 billion over the last three years. Fiat Auto had forecast in February that it would be profitable this year, but analysts now expect Fiat Auto to record an operating loss of € 200 million and an overall loss including debt payments of about € 500 million.