MG plans its first mainland European factory in Spain as China’s EV price war becomes an industrial one

MG returns to Europe as a manufacturer

The plant is expected to be built in Ferrol and As Pontes. Construction could begin in 2027, with production following in 2028, provided Spain’s central government approves the foreign investment. The first phase is worth around 200 million euros, while the second phase should take annual production capacity to 120,000 cars.

According to MG, the project is a key step in the brand’s “In Europe, For Europe” strategy. The factory is intended to combine vehicle production, development, component supply and logistics, while creating around 2000 jobs across Europe. Local Spanish sources suggest the total could reach 2300 jobs, including about 1000 direct positions.

This is not only expansion, but tariff strategy

MG’s decision comes as the European Union applies countervailing duties to battery electric vehicles made in China. In the European Commission’s final decision, SAIC Group received an additional tariff of 35.3 per cent, on top of the usual 10 per cent import duty for cars. That puts MG under particular pressure, because SAIC received one of the highest rates among Chinese manufacturers.

This is the real logic behind the Galicia factory. If MG produces inside the European Union, it no longer sells only a cheap electric car imported from China. It can present itself as a local industrial player. That does not automatically solve every question around rules of origin, components and the battery supply chain, but it reduces political vulnerability and gives the brand a stronger position with European customers and authorities.

Galicia is not a random choice

Galicia gives MG three practical advantages: Atlantic logistics, access to the Spanish and Portuguese industrial base and a political appetite for a major new industrial project. Ferrol has a port, As Pontes has an industrial background and Spain is already becoming an important European bridgehead for Chinese car makers. Reuters notes that Chery and EBRO also plan production in Barcelona at the former Nissan plant, with a target of reaching 150,000 cars a year by 2029.

That means Spain is no longer competing only with Germany, France or Italy as one of Europe’s old car making centres. It is competing for the next generation of electric car production, helped by ports, labour costs and investment support.

120,000 cars a year is moderate, not gigantic

MG’s planned 120,000 cars a year sounds substantial, but by European car industry standards it is more a medium sized plant than a giant. For comparison, the Chery and EBRO project in Spain aims to reach 150,000 cars a year.

That suggests MG is not building a European mega factory in the first phase. SAIC is creating a strategic anchor point instead, one that allows it to control production, shorten the supply chain, react faster to the market and increase capacity later if needed. The 200 million euro investment is also modest for a car plant, especially compared with full cycle electric vehicle factories or battery projects that run into the billions.

MG needs local trust in Europe

MG grew quickly in Europe, but its image remains complicated. On one side, the brand offers affordable electric and hybrid cars such as the MG4, MGS5 EV, MGS6 EV, MG HS Hybrid Plus and Cyberster. On the other, it must keep proving that it is not simply a Chinese export brand wearing a British badge. A third issue also hangs over the company: among Chinese sourced cars currently on sale, MG’s quality reputation is hardly the strongest.

Local production could change that picture. If MG can build high quality cars in Europe, use more local suppliers and link development with European partners, the brand becomes psychologically less distant for buyers. Japanese and Korean manufacturers travelled a similar road before: first came the price, then the factory, then the trust.

Competition is coming from every direction

MG is not alone in the Chinese expansion into Europe. According to a Reuters overview, Geely Group is the largest China linked manufacturer in Europe, with 2.5 per cent of new registrations. SAIC sits at 2.4 per cent, BYD at 2.2 per cent and Chery’s Omoda and Jaecoo brands at about 2.0 per cent. Meanwhile, BYD, Chery, FAW Hongqi, Leapmotor and others are also searching for production or partnership solutions.

That puts European manufacturers in a difficult position. Volkswagen, Renault, Stellantis and Ford are no longer competing only with imported Chinese cars. Increasingly, they will face Chinese brands built in Europe, possibly with lower cost bases, faster model cycles and strong battery technology.

European policy now gets its own logic back

The European Union’s tariffs were intended to protect local industry from unfairly subsidised imports. If Chinese manufacturers respond by building factories in Europe, a paradox appears. Tariffs may reduce price pressure from cars imported from China, while at the same time accelerating the permanent industrial presence of Chinese manufacturers in Europe.

Industrially, that can benefit Europe if new factories create jobs, use local suppliers and pay taxes in Europe. In competitive terms, however, the pressure becomes even tougher. A locally built MG may be more politically acceptable than an imported MG from China, while remaining highly aggressive on price.

The critical questions remain open

MG’s announcement sounds confident, but several important questions remain unanswered. First, the project still needs approval from Spain’s central government. Second, it is not yet clear which models will be built in Galicia. Third, MG has not explained how many components and batteries will genuinely come from Europe and how much will remain tied to the Chinese supply chain.

That last point will decide how European MG production really becomes. Assembling a car in Europe is one thing. Creating a local value chain for batteries, power electronics, software and critical components is another level entirely.

For European buyers, this means more choice and stronger price pressure

If the Galicia plant starts as planned in 2028, MG could gain a new price advantage in Europe. Local production would reduce logistics risk, make the tariff environment easier to manage and allow models to be adapted more quickly to European equipment, safety rules and buyer preferences.

For consumers, that probably means more electric and hybrid models at competitive prices. For European manufacturers, it means a less comfortable playing field. MG may no longer be merely a cheaper import. It could become a local rival, with a local factory, local workers and a model range tailored for the European market.

Technical summary

MG, or SAIC Motor, plans to build its first mainland European production facility in Galicia, Spain.

The investment is worth around 200 million euros.

Production is expected to begin in 2028, while construction could start in 2027 after the required approvals.

After the second phase, planned production capacity is up to 120,000 cars a year.

The project could create around 2000 to 2300 jobs, depending on the counting method.

The strategic background is clear: SAIC’s China built electric cars face an additional 35.3 per cent EU countervailing duty.