On July 23, 2026, Geely Automobile Holdings Ltd (HKEX: 00175) announced that its wholly-owned subsidiary, Geely SPV, has entered into a share purchase agreement with Ford Motor's wholly-owned unit, Ford NL. The deal involves acquiring a 34% stake in Ford España, S.L. for €221 million (approximately RMB 1.765 billion).
Following the transaction, Ford will hold a 66% stake and Geely will hold 34%. The entity will be accounted for as an associate using the equity method and will not be consolidated into Geely's financial statements.
This marks the second major collaboration between the two companies in 16 years, following Geely's $1.8 billion full acquisition of Volvo from Ford in 2010. However, unlike that full takeover, this time Geely is only taking a minority stake—so is this a good deal?
Target's Net Profit Plunges 70%, Capacity Utilization Severely Low
According to disclosed financial data, Ford España posted a net profit of €69.8 million in 2025, a dramatic 70.5% decline from €236.3 million in 2024. Revenue also fell 11% year-on-year to €4.624 billion. The primary driver of this profit decline was a sharp drop in production at its Valencia plant, which manufactured only 98,591 vehicles in 2025, down 18.69% from 121,250 units in 2024. The factory, once Ford's largest production base outside the US, has a designed annual capacity of 400,000 to 500,000 vehicles, but its current capacity utilization rate is below 25%.
With net profit plummeting from €236 million to under €70 million, the €221 million consideration for a 34% stake implies a P/E ratio of over 9 times based on 2025 earnings. Given that the target's capacity utilization has hit historic lows and profitability is still declining, this valuation is not cheap.
Why is Geely "Taking Over" a Loss-Making Factory?
Geely's calculations are not about short-term financial returns but about strategic positioning in the European market.
First, it aims to bypass EU tariff barriers. The EU imposes countervailing duties of 10% to 37.6% on Chinese electric vehicles (EVs), making the cost disadvantage of complete vehicle exports increasingly severe. By localizing production in Spain, Geely can directly circumvent these tariff walls. In the first half of 2026, Geely's overseas sales reached 474,000 vehicles, up 158% year-on-year, already exceeding the total exports for all of 2025. Based on this, the company has twice raised its full-year export target, from 640,000 to 900,000 vehicles. Establishing local production capacity in Europe is a critical move to sustain this export momentum.
Second, it adopts a light-asset model to reduce overseas risks. In April 2026, Geely Holding Group clarified its new overseas expansion strategy—no longer building new production factories, but instead promoting business layout through cooperation, integration, and revitalizing existing capacity. Building a factory with a capacity of 400,000 vehicles typically requires billions of euros and several years. Acquiring a minority stake in a mature factory for €221 million not only significantly reduces capital expenditure but also allows direct access to Ford's established European supply chain, skilled labor force, and export ports. Wanlian Securities investment advisor Qu Fang commented that this is a "light-asset, high-efficiency overseas deployment model."
Third, it secures a mature European manufacturing platform. According to the plan, the joint venture is scheduled to begin operations in the first half of 2027. Geely will produce two new energy SUV models at the Valencia plant, with the first vehicle expected to roll off the assembly line in 2028. Ford will continue producing the Kuga and will begin manufacturing a new compact SUV from the Bronco family in 2028. Additionally, the two parties will jointly develop a new Ford-branded crossover model. It is important to emphasize that the factory will only handle production; it will not have independent sales, R&D, or brand operations capabilities—Geely will firmly control product definition and brand leadership, while Ford will contribute manufacturing expertise.
Why is Ford Willing to "Sell at a Loss"?
For Ford, this transaction is equally a rational balance sheet repair operation.
In 2025, Ford recorded $19.5 billion in related charges due to its electric vehicle strategy adjustment, with its EV business continuing to incur losses. That same year, Ford's global wholesale sales were approximately 4.395 million units, down 2% year-on-year, marking the first time it was surpassed by BYD and pushed out of the top five global automakers by sales volume. In Europe, Ford faces multiple pressures including shrinking demand, high costs of electrification transition, and significant overcapacity. The Valencia plant produced less than 100,000 vehicles in 2025, far below its 400,000-unit design capacity. By transferring some capacity to Geely, Ford can significantly reduce fixed costs, preserve local jobs, maintain production capabilities, and establish technical cooperation with a leading Chinese EV company.
Ford Motor's Europe President, Jim Baumbick, stated at the signing ceremony that the goal of the cooperation is to "fully unleash the factory's full production potential and build a low-cost, efficient manufacturing system."
Risk Assessment: From Volvo to Valencia, Geely's Integration Test
While the strategic logic of this deal is clear, the potential risks cannot be ignored.
First, whether the target's profitability can be restored is uncertain. Net profit has plunged 70% over the past year, and capacity utilization is below 25%. The joint venture will not officially start production until 2027, with the first new vehicle not rolling off the line until 2028. During the more than two years before that, the plant will still need to continue producing existing models like the Kuga—while Ford's sales in the European market are still shrinking. Geely will have to wait two years to utilize the factory's capacity, and during this period, any losses from the target will be shared by both parties according to their shareholding ratios.
Second, there are the limits of control with a minority stake. Geely only holds a 34% stake, while Ford retains 66% controlling interest. Although the joint venture is positioned as a pure contract manufacturing platform with clear division of responsibilities, Geely's influence is inherently limited in key areas such as daily factory operations, cost allocation, and production scheduling priorities.
Third, there is the uncertainty of EU regulatory approval. The joint venture needs to obtain regulatory clearance before it can begin operations. Against the current sensitive backdrop of China-EU trade relations, the approval process could face additional political scrutiny.
Conclusion
Acquiring a 34% stake in a factory with a 70% net profit plunge and below 25% capacity utilization for €221 million is certainly not a low price from a financial return perspective. However, from a strategic standpoint, this deal represents a critical move by Geely to "trade time for space" in the European market—using less than one-tenth the cost of building a new factory to secure a channel that bypasses EU tariff barriers and provides direct entry into a mature European manufacturing system.
Sixteen years after their last collaboration, Geely and Ford have joined hands again. But unlike the full acquisition of Volvo this time, Geely has chosen a model of minority stake, light assets, and contract manufacturing. This represents a logical evolution for Chinese automakers going global, from "buying brands" to "buying capacity," and is the first implementation of Geely's "no new factories, find capacity" strategy in Europe. The ultimate success or failure of this deal will not depend on whether the €221 million was well spent, but on whether Geely's EVs rolling off the line in 2028 can truly establish a foothold in the European market—and that will be the beginning of another story.
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