Geely agrees to take over part of Ford’s Spanish factory, report says — Explained

• Geely will build vehicles on an idle assembly line at Ford’s Almussafes plant near Valencia, which is currently running at less than a quarter of its capacity.
• Spanish Prime Minister Pedro Sanchez is set to announce the deal at the plant on Thursday, following months of talks between the two automakers.

Chinese auto giant Geely Auto (HKEX: 0175) has agreed to take over part of a Ford factory in Spain, Bloomberg reported on Thursday, citing people familiar with the matter.

Geely will build vehicles on an idle assembly line at the facility, according to the report. The plant, located in Almussafes near Valencia, is where Ford currently makes the Kuga crossover.

Spanish Prime Minister Pedro Sanchez is set to announce the deal at the plant on Thursday, said the people, who asked not to be named. A government spokesman confirmed Sanchez’s plans but declined to comment further, according to the Bloomberg report.

The Almussafes plant — once Ford’s largest outside the US — has an annual capacity of 450,000 vehicles. It has been running at less than a quarter of that capacity.

Bringing Geely in could help boost the plant’s utilization and preserve or restore local jobs, the Bloomberg report noted.

Talks between Geely Auto and Ford have been underway for months. In February, Reuters reported that the two were in discussions about a potential partnership, aiming to share technology and manufacturing costs.

At the time, the two sides discussed Geely using Ford’s plants in Europe to build vehicles for the European market, as well as a potential framework for sharing vehicle technology, including autonomous driving, according to the Reuters report.

In May, Spanish media outlet La Tribuna de Automoción reported that Geely would take over the plant’s Body 3 assembly line and plans to build a new energy vehicle (NEV) model based on its GEA (Global Intelligent New Energy Architecture) platform there.

The model could be a localized European version of the Geely EX2 — known as the Xingyuan in China — a compact hatchback, and will be offered with hybrid, plug-in hybrid, and battery electric powertrain options, the report said at the time.

Building vehicles locally in Europe would help Geely sidestep the European Union’s tariffs on China-made electric vehicles (EVs) and save on shipping costs. It would also signal to dealers and customers that the company plans to stay in the market for the long term.

Ford and Geely have a longstanding relationship. The Chinese company acquired Volvo Cars from Ford 16 years ago.

The collaboration also highlights Sanchez’s determination to boost Spain’s role in European automaking. The prime minister has been courting Chinese automakers by offering a local manufacturing base to sidestep EU tariffs.

Another Chinese automaker, Chery (HKEX: 9973), has revived a former Nissan factory in Barcelona with Spanish brand Ebro.

Stellantis NV and CATL (HKEX: 3750) plan to invest €4.1 billion ($4.7 billion) in a battery factory in Zaragoza, Spain, which is set to start operations in 2028.

Exports are becoming Geely Auto’s strongest growth engine. The company sold a record 102,874 vehicles overseas in June, up 157.11% year-on-year, with its monthly exports topping the 100,000 mark for the first time, according to data compiled by CnEVPost.

In contrast, its performance in the domestic market remains weak. Geely Auto sold 137,925 vehicles in China in June, down 29.64% year-on-year.