by TAIPEI/DETROIT, March 6 (Reuters) – Foxconn wants to do for electric vehicles (EVs) what it did with iPhone, but first it needs to find the next Apple – and fast.
The Taiwanese contract manufacturer faces competition in the market for the development of white-label electric vehicles that can be customized for customers, whether it’s a major automaker, delivery service provider or some other company.
And as the electronics giant brings established strengths to the mostly loss-making electric vehicle industry, Foxconn needs to win a big deal to prove it can ride the wave of disruption, analysts say.
Foxconn, officially named Hon Hai Precision Industry Co Ltd (2317.TW), will announce its results on March 15.
“The results of many of our collaborations will be realized sequentially in 2023,” the company said in a statement to Reuters. “The demand for electric vehicles is driving the industry disruption, with prominent traditional automakers finding and focusing on solutions for cleaner and smarter mobility.”
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The company’s offer is simple: let us build your next electric vehicle. It is developing a specialized supply chain, including chips and batteries, and has acquired the former General Motor Co (GM.N) plant in Lordstown, Ohio. It has also hired a former Nissan (7201.T) executive, Jun Seki, to lead its efforts.
For now, building in Ohio will allow Foxconn to offer its customers access to U.S. federal stimulus under the Inflation Reduction Act, said Daiwa Capital Markets analyst Kylie Huang. That’s a selling point as traditional automakers juggle building gas-powered vehicles with plans to build their own EV capacity.
“If they don’t get one this year, next year will be more difficult,” Huang said of Foxconn’s search for an EV contract with a traditional automaker.
Failure to “catch that wave” could force Foxconn to compete with lower-end Chinese automakers, which could shift to contract EV manufacturing and compete on cost, Huang said.
Canada’s Magna International (MG.TO), a top auto parts supplier, is already building cars for others, and China’s Geely (0175.HK) has expressed interest. China’s Guangxi Automobile Group has started manufacturing electric vehicles for Japanese delivery company Sagawa Express Co.
Foxconn relies on its Mobility in Harmony EV (MIH) platform to win customers. It calls MIH “the Android system” for electric vehicles and is courting partners to standardize technologies so that model variants can be developed quickly and cost-effectively.
“We want to create that kind of ecosystem so that anyone – United Airlines, for example – can say, ‘I want to build a car,'” Jerry Hsiao, Foxconn’s chief product officer, told Reuters during a tour of the company’s sprawling facility in Ohio.
“Sooner or later, the traditional top automakers might say, ‘Hey, I want to be a product marketing company. Why do I have to employ so many people?’” he said.
Hsiao also worked on Google’s first Android phone and now sees EVs at a similar commercial turning point.
Foxconn’s ambitions are aggressive. First, by 2025, Foxconn is targeting a 5% share of the global EV market and $33 billion in revenue from manufacturing EVs and components. Foxconn’s long-term goal is to manufacture nearly half of all EVs in the world.
Electric vehicle sales have risen, led by China. Five percent of the market, assuming an EV adoption rate of about 20% by 2025, would be around 900,000 vehicles, about what market leader Tesla (TSLA.O) sold in 2021.
‘DO NOT MAKE IPHONES’
“Everyone’s eyes are bigger than their stomachs in the EV market,” said Sam Fiorani, vice president at AutoForecast Solutions.
His company estimates Foxconn will reach about 65,000 vehicles in 2025 and 157,000 vehicles in 2026. “They don’t make iPhones here,” he said.
EV outsourcing will reach $36 billion in 2025 and $144 billion in 2030, with 800,000 and 3.2 million EVs, respectively, estimates Goldman Sachs.
Key for Foxconn will land its first major customer anchoring its Ohio plant, which is currently building a small batch of electric endurance pickup trucks for Lordstown Motors, in which it has an interest. It has announced plans to build a vehicle for EV startup Fisker (FSR.N).
Foxconn chairman Liu Young-way told reporters last month he plans to visit US customers, Foxconn’s Ohio and Mexico plants in March or April, where Foxconn has made significant investments in auto parts.
“There should be some related signing activities,” Liu said.
Foxconn already supplies parts to Tesla and makes camera modules for automakers and suppliers.
“They can probably buy things cheaper than anyone else in the world,” Raymond Tsang, a Shanghai-based partner at consulting firm Bain & Company, said of Foxconn.
The race for volume in an industry where Tesla and other EV makers are slashing prices is raising the stakes.
The former GM plant in Ohio, which Foxconn bought from Lordstown Motors, is one of the highest-volume single-line vehicle assembly plants in the world. It could build about 320,000 vehicles a year without overtime.
Foxconn plans to build around 300,000 electric vehicles at the plant, Ian Upton, director of production control at Foxconn Ohio, told Reuters.
“We’d like to find a customer that’s in the range of about 250,000, and then we can fill in some of the other stuff with niche products,” he said.
Reporting by Sarah Wu in Taipei and Ben Klayman in Detroit, additional reporting by Kevin Krolicki in Singapore; Editing by Sam Holmes
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