Ford and Geely strike deal for EV production at Spanish plant, newspaper reports

LISBON/MADRID, July 22 (Reuters) - Ford Motor and China's Geely have struck a landmark deal under which the U.S. automaker will sell part of its Almussafes plant near Valencia, paving the way for Geely to manufacture electric vehicles in Spain, ABC newspaper reported on Wednesday.

Citing sources familiar with the matter, ABC said the announcement was expected during a visit to the Almussafes plant on Thursday by Spanish Prime Minister Pedro Sanchez and Ford Europe President Jim Baumbick.

Ford and Geely did not immediately respond to requests for comment.

ABC said the deal would give Geely, owner of brands including Volvo, Polestar and Lotus, a manufacturing base inside the European Union, helping it to avoid EU tariffs on electric vehicles imported from China while providing direct access to the European market.

The agreement underscores growing pressure on Chinese automakers to expand overseas as competition intensifies at home, said Eugene Hsiao, head of China autos research at Macquarie Capital.

"While tariffs are always a key consideration, this deal more reflects the urgency for Chinese automakers to look outside of the crowded domestic EV market in order to sustain growth," Hsiao said.

Foreign automakers, meanwhile, are finding ways to monetise underused legacy assets, he added.

For Ford, the deal would cut fixed costs through the shared use of factory infrastructure while helping to safeguard jobs and production at Almussafes, the future of which has been clouded by the phasing out of several models and its dependence on its Kuga model.

The newspaper said the agreement would allow Geely to produce its EX2 electric vehicle at Almussafes.

Reuters reported in February that Ford and Geely were in talks over a potential manufacturing and technology partnership, with Ford's Valencia plant seen as the most likely European site involved in the discussions.

Geely has already pursued overseas partnerships, including with Renault in South Korea and Brazil, as Chinese automakers seek faster access to foreign markets and a stronger profile with local governments.

"We expect other Chinese OEMs to follow suit to quickly gain access to overseas EV markets while raising their profile with local governments," Hsiao said.

Shares in Geely Auto, part of Geely Holding Group, rose 0.45% on Thursday, almost in line with the broader market.

(Reporting by Sergio Goncalves in Lisbon, Victoria Waldersee in Madrid and Ju-min Park in Beijing; Editing by David Goodman and Jamie Freed)