Ford and Geely reportedly reach deal to produce EVs at Spanish plant

The European automotive landscape is poised for a significant transformation following reports that Ford Motor Company and China’s Zhejiang Geely Holding Group have reached a pivotal agreement. This deal, as reported by Reuters, citing the Spanish newspaper ABC, would see Geely commencing electric vehicle (EV) production at Ford’s long-standing Almussafes plant near Valencia, Spain. The official announcement of this strategic partnership is anticipated during a high-profile visit to the factory on July 23, involving Spanish Prime Minister Pedro Sánchez and Ford Europe President Jim Baumbick. This collaboration represents a critical juncture for both automotive giants, offering Ford a potential solution to optimize its European manufacturing assets while providing Geely with a crucial foothold for direct market access within the European Union, strategically bypassing potential import tariffs on Chinese-made EVs.

A Landmark Partnership Emerges from Shifting Tides

The reported agreement signals a profound shift in global automotive manufacturing strategies, reflecting the accelerating transition to electric vehicles and the increasing competitive pressures in key markets. For Ford, the decision to potentially share its Almussafes facility with a Chinese competitor underscores the intense economic realities facing legacy automakers as they navigate costly EV transitions and seek to maximize asset utilization. For Geely, a conglomerate known for its aggressive expansion and diverse portfolio of brands including Volvo, Polestar, Lynk & Co, and Zeekr, establishing a manufacturing base within the EU offers an invaluable strategic advantage. It positions the company to capitalize on the burgeoning European EV market while mitigating the risks associated with escalating trade tensions and the looming threat of punitive tariffs. The Spanish government’s involvement, symbolized by the Prime Minister’s expected presence, highlights the deal’s national economic importance, particularly concerning job preservation and industrial stability in the Valencia region.

Almussafes: A Plant at a Crossroads

The Almussafes assembly plant, a cornerstone of Ford’s European operations since its inauguration in 1976, has been at the epicenter of considerable uncertainty in recent years. Historically, the facility has been a robust manufacturing hub, producing popular models such as the Fiesta, Focus, Mondeo, S-Max, and Galaxy. However, Ford’s strategic shift away from sedans and multi-purpose vehicles (MPVs) in favor of SUVs and electric vehicles has led to the phase-out of several key models previously manufactured at Almussafes. The plant’s increasing reliance on the Kuga, a successful SUV model, could not fully offset the production gaps created by these discontinuations.

This situation led to significant challenges, including reduced production volumes, multiple temporary layoffs, and substantial job cuts. In March 2023, Ford announced a further reduction of 1,100 jobs at Almussafes as part of a broader restructuring across its European operations, aiming to streamline its workforce and improve efficiency. The future of the plant became a subject of intense speculation, with concerns mounting over its long-term viability. Ford had previously committed to investing in Almussafes for the production of next-generation electric vehicles, but the details and timing remained fluid, leading to ongoing anxieties among employees and local authorities. The potential partnership with Geely therefore emerges as a critical lifeline, offering a pathway to sustain operations, retain skilled labor, and ensure the continued economic contribution of the plant to the region.

Ford’s Strategic Pivot to Electric Mobility in Europe

Ford’s decision to consider a partnership of this nature must be viewed within the context of its ambitious, and often challenging, global electrification strategy. The company has committed to an "all-electric future" in Europe, aiming for its entire passenger vehicle lineup to be fully electric by 2030. Achieving this goal requires massive investments in new EV platforms, battery technology, and charging infrastructure, alongside a retooling of existing manufacturing facilities. Ford has earmarked over $50 billion globally for EV development and production through 2026.

In Europe, this transformation has involved difficult decisions. For instance, Ford’s Saarlouis plant in Germany, which produced the Focus, is slated for closure by 2025, with no new EV production allocated. Almussafes, on the other hand, was chosen in 2022 to produce a new multi-energy vehicle (MEV) architecture, a decision that initially secured its future but still left questions about its full capacity utilization in an all-electric future. The prospect of sharing the plant with Geely would allow Ford to reduce its fixed costs associated with the facility, optimize its existing infrastructure, and potentially free up capital for further investments in its core EV platforms and technologies. This pragmatic approach reflects a broader industry trend where automakers are increasingly open to collaborations, joint ventures, and contract manufacturing to mitigate financial risks and accelerate their transition.

Geely’s Ambitious European Expansion and the EX2 Electric Vehicle

Geely’s reported interest in the Almussafes plant is a clear manifestation of its aggressive global expansion strategy, particularly its intent to penetrate the lucrative European EV market more deeply. Over the past two decades, Geely has transformed from a domestic Chinese automaker into a formidable international player, acquiring Volvo Cars in 2010 and subsequently launching successful brands like Polestar, Lynk & Co, and Zeekr, all of which have a significant presence or ambitions in Europe.

The Spanish newspaper ABC specifically mentioned that Geely could produce its "EX2 electric vehicle" at the Almussafes plant. While details about the EX2 are currently scarce, industry observers suggest it could be a new model under one of Geely’s existing international brands or even a new brand specifically designed for export markets. Given Geely’s diverse portfolio, the EX2 could potentially be a compact SUV or a sedan, targeting the highly competitive segments of the European EV market. The ability to produce this vehicle within the EU would be a game-changer for Geely, allowing it to bypass the logistical complexities and time associated with importing vehicles from China. More importantly, it directly addresses the critical issue of trade barriers.

Navigating the Shifting Sands of EU Trade Policy

A primary strategic driver for Geely to establish production within the European Union is undoubtedly the escalating trade tensions and the ongoing anti-subsidy investigation by the European Commission into Chinese EV imports. The Commission launched its investigation in October 2023, scrutinizing whether Chinese EV manufacturers benefit from unfair state subsidies, potentially distorting competition in the European market. The probe is expected to conclude by November 2024, with preliminary findings and potential provisional tariffs possibly announced as early as July.

Should the EU impose significant tariffs, which some analysts predict could range from 10% to 25% or even higher, the cost advantage currently enjoyed by Chinese EVs imported into Europe would be severely eroded. By manufacturing the EX2 at Almussafes, Geely would effectively circumvent these potential tariffs, ensuring its vehicles remain competitively priced for European consumers. This strategic move would insulate Geely from the direct impact of protectionist measures, granting it a substantial competitive edge over other Chinese EV makers that rely solely on exports from China. It also sends a strong signal of Geely’s long-term commitment to the European market, moving beyond simple export models to direct investment and local production.

The Deal’s Mechanics: What We Know (and Can Infer)

While specific financial terms and operational details of the reported agreement remain undisclosed, the arrangement is likely to take the form of a contract manufacturing agreement or a long-term lease of a portion of the Almussafes facility. Under such a scenario, Geely would utilize Ford’s existing infrastructure, skilled workforce, and potentially its supply chain, benefiting from the plant’s established operational capabilities. For Ford, this "shared use" model would directly translate into reduced fixed costs, as overheads and maintenance expenses would be distributed or partially covered by Geely’s operations. It also ensures the continued employment of a significant portion of the Almussafes workforce, which is a major political and social consideration.

The anticipated announcement on July 23, with the presence of Spanish Prime Minister Pedro Sánchez and Ford Europe President Jim Baumbick, underscores the high-level endorsement and strategic importance of this collaboration. Their joint appearance would likely emphasize job creation and preservation, industrial competitiveness, and the fostering of international partnerships that benefit the Spanish economy.

Reactions from Stakeholders

The news, once officially confirmed, is expected to elicit a range of reactions from key stakeholders:

• Spanish Government: Prime Minister Pedro Sánchez and his administration are almost certain to hail the deal as a significant victory for Spanish industry and employment. It would be presented as a testament to Spain’s attractiveness for foreign investment and its commitment to fostering the green transition. The deal would help stabilize a crucial industrial region.
• Ford Management: Ford Europe President Jim Baumbick and other executives would likely emphasize the pragmatic approach to asset optimization, the strategic importance of partnerships in the EV era, and the company’s commitment to the long-term viability of its European operations, including the Almussafes plant. They would highlight the benefits of reducing fixed costs and ensuring efficient use of valuable manufacturing capacity.
• Geely Leadership: Geely representatives would undoubtedly underscore the strategic importance of establishing a manufacturing footprint within the EU, emphasizing direct market access, tariff avoidance, and their commitment to serving European customers with locally produced electric vehicles. This move would reinforce Geely’s image as a global player with a deep understanding of local market dynamics.
• Labor Unions: Workers’ unions at the Almussafes plant are expected to welcome the agreement with cautious optimism. While the prospect of job preservation and renewed production would be a significant relief after years of uncertainty, they would likely seek assurances regarding long-term job security, working conditions, and potential retraining for EV production.
• Industry Analysts: Automotive industry analysts would likely view this partnership as a pioneering example of how legacy automakers and emerging Chinese EV players can find symbiotic relationships. They would analyze the financial implications for both companies, the competitive landscape in Europe, and the potential for similar collaborations in other regions. Many would see it as a direct response to the increasing geopolitical and economic pressures shaping global trade.

Broader Implications for the European Automotive Landscape

This reported agreement, if finalized, carries profound implications not just for Ford and Geely but for the entire European automotive industry:

1. Increased Competition: It signifies an intensified competitive environment within Europe, with Chinese brands no longer merely exporting but establishing local manufacturing, directly challenging established European OEMs on their home turf.
2. Model for Collaboration: The deal could serve as a template for future collaborations between Western and Chinese automakers, particularly as European plants face underutilization due to the EV transition and Chinese firms seek to de-risk their European market entry.
3. Impact on Supply Chains: Local production by Geely would likely lead to the development of localized supply chains in Spain and the broader EU, potentially creating new opportunities for European component suppliers but also increasing competition.
4. Government Policy Effectiveness: The success of this deal in circumventing potential EU tariffs would highlight the effectiveness, or perhaps the limitations, of trade protectionism in influencing global manufacturing decisions. It demonstrates that companies are actively seeking strategies to adapt to, rather than be constrained by, such measures.
5. Shifting Industrial Dynamics: The Almussafes plant, once a symbol of Ford’s European industrial might, could become a symbol of a new era of transnational manufacturing, where facilities are shared and utilized by multiple global players, driven by economic efficiency and geopolitical realities.

The reported agreement between Ford and Geely is more than just a business deal; it is a powerful indicator of the profound forces reshaping the global automotive industry. It reflects the imperative for legacy automakers to adapt and innovate, the relentless ambition of Chinese EV manufacturers, and the complex interplay of economic strategy, trade policy, and geopolitical realities in the transition to an electric future. The formal announcement on July 23 will undoubtedly mark a new chapter for the Almussafes plant and could set a precedent for how global automotive partnerships evolve in the coming decade.