Why did they switch from 6.5 to 7.35??

[DocAV]

The Change from 6,5 to 7,35 was a natural evolution of the Cartridge as had happened in other countries with their ammo (Going from Round Nose to Pointed).
The Italians also had the recent ( 1935-36) experience in Ethiopia, where the long, pencil thin 6,5 FMJ-RN, seemed to go straight through the Locals, and do little damage to the Ethiopian warrior. They had a look at other countries' ammo, and came up with a 7,35 Bullet , using the necked up 6,5 case ( in order to utilize the existing Carcano action system -- an exercise in Economy). The New Bullet had a few interestring features, like the insert -point like the British Mark VII bullet, to set the centre of gravity of the 7,35 bullet towards the rear, to give it better flight; This insert also gave the FMJ better "upset" wounding potential. As forward-looking as this new cartridge was ( a fore-runner of the Post war "Intermediate" cartridges), it was rendered useless by the turn of events, the June 1940 entering of Italy on the side of Germany in WW II.
Changing Calibre Horses in War is not a good move, so the Majority of the M38 7,35 rifles were hived off to Finland for its various wars with the Soviet Union, in which case, the Finns used them only for training and Guard use, or not at all.
LMGs etc which had been made for the 7,35 cases only need a Barrel change back to 6,5, and so remained in Italy.

The 7,35 rifles ( M38 FC, M38 Cav C, M38 TS) were only made from 1937/8 to 1939/40; ammo dated 37,38,39 is known; I have not seen any "40" dated 7,35 ammo, although it may exist.
Right Cartridge, wrong time. It would have made an excellent "assault rifle" Cartridge, but with a Semi-Auto type Light rifle --- Armaguerra did make one in 7,35 in 1939, but it didn't get up with the WW I-thinking Italian General Staff, and Breda had its PG Model already in 6,5 and 7x57mm ( semi and Full auto)...met a similar fate.

And comparing case dimensions, the 7,35x51 Cartridge comes very close to the other "Intermediate" cartridge of the 1930s, the 7x53 Pedersen ( aka .276 P.), although the Pedersen had a ballistically better bullet design.

Italy was not in any position in the 1930s Industrially or Financially to undertake a complete replacement of the 6,5 by anything else...especially if it entered a European (World )War.
Even the 7,35 development was a " minimal change" effectively necessitating a new Barrel and ammo...all the rest was the same ( Bolt-Action, ammo clip, etc.). One thing that they did realise ( after the Ethiopian campaign) was that long range sights were a luxury, as most Battles were fought in under 300 metres, so a fixed sight sufficed. ( and cost a lot less)

SO the decision to stop all production of 7,35 rifles and ammo once Hitler had consolidated his Polish campaign, and had invaded France. By the time Italy entered in June 1940, they were back to full 6,5 ammo production and the "M38FC" ( in 6,5, aka "M91/38") was also in full production by Terni, with the Gardone Valley Gunmakers covering the Carbine and TS rifle supplies, also in 6,5mm.

Regards,
Doc AV