Citi: GEELY AUTO(00175) acquires 34% stake in Ford's Spanish factory to help expand into the European market, expecting a positive market reaction.

Citibank released a research report stating that it reiterates the "buy" rating for GEELY AUTO (00175) with a target price of 30 Hong Kong dollars. The bank stated that Geely has signed an agreement with Ford to acquire 34% equity in its idle Body3 factory in Valencia, Spain, with a total investment of 221 million euros. The factory is designed to have an annual production capacity of 400,000 vehicles, and it is expected to generate a net profit of 70 million euros in the 2025 fiscal year (2.36 billion euros in the 2024 fiscal year). If Geely ultimately obtains an annual production capacity of 150,000 vehicles, the cost is estimated to be only 10% to 20% of building a new greenfield factory. The transaction is expected to be completed in the fourth quarter of 2026, which will help Geely to enter the European car production market through Completely Knocked Down (CKD) assembly, and it is expected to receive a positive market response. The bank pointed out that for Geely, this agreement is a milestone breakthrough in its long-term expansion strategy in Europe. The localized production base will help the company avoid potential import tariffs on Chinese electric vehicles by the European Union, and greatly enhance its price competitiveness. In addition, Geely can directly utilize Ford's existing manufacturing infrastructure and local supply chain network, shorten the overseas layout period, and monetize its electric vehicle technology through licensing and contract manufacturing income.