Italians were actively designing tanks in the interwar period, and produced some of the more commercially successful designs of the 30s... Tankettes. It was only in the late 30s that design started on actual turreted tanks, and there was a limited manifacturing capability to produce them.
It seems that they managed to produce in quantities a fairly decent light and medium tank, the L6/40 (which was sort of a Stuart-looking Panzer II, started production in '41) and the M13/40 respectively.
It seems that a failure to properly upgrade these models, which were not suitably gunned to deal with newer, better armoured tanks, and suffered from a weak bolted hull construction limited their ability to perform. The M14/41, the M13/40's successor/replacement, addressed the construction problem, but because they needed to produce it in numbers and therefore to make relatively few changes, they kept the obsolescent 45mm gun. On top of that, they had overheating problems, which was a huge liability in Africa, the main theatre of operations for Italian armour.
All in all Italian armour was not too dissimilat from contemporary European designs, but suffered from some critical shortcomings that they never has either the time or the production ability to fix properly.
Apparently they worked on a couple fairly good designs from 1941 onwards, the M16 and P26, which were hampered by delays resulting in the cancellation of the M16 (it was a cruiser tank for the desert, and the Brits had just pushed the Afrikakorps into Tunisia) and a very limited number of P26 built (entering production in '43, shortpy before the capitulation).
