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Foxconn Is In A Rush To Join The EV Field

Foxconn Is In A Rush To Join The EV Field
Foxconn wants to replicate its success with the iPhone for electric vehicles (EVs), but it must first identify the next Apple quickly.
When it comes to building white-label EVs that can be customized for customers, including major automakers, delivery services, and other businesses, the Taiwanese contract manufacturer is up against competition in the market.
Foxconn needs to land a significant contract, according to analysts, to demonstrate its ability to ride the wave of disruption even though the electronics giant brings well-established strengths to the largely loss-making EV industry.
When Foxconn, formerly known as Hon Hai Precision Industry Co Ltd, releases its financial results on March 15, it will provide an update on its EV manufacturing business.
"The results of many of our collaborations will be realized one after the other in 2023," the company said in a statement to Reuters. "The demand for EVs is driving industry disruption where prominent traditional automakers have and are pivoting to finding solutions for mobility that are cleaner and smarter."
The company's simple pitch is to build your next EV with us. It has acquired the former General Motors plant in Lordstown, Ohio, and is developing a specialized supply chain that includes chips and batteries. To oversee its efforts, it has also hired Jun Seki, a former Nissan executive.
According to Daiwa Capital Markets analyst Kylie Huang, Foxconn can currently provide customers with access to U.S. federal incentives under the Inflation Reduction Act by constructing in Ohio. That's a selling point as conventional automakers balance producing gasoline-powered cars while also planning to increase their production of electric vehicles.
"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.
Foxconn might have to compete with smaller Chinese automakers who may switch to EV contract manufacturing and compete on price if it doesn't "catch this wave," according to Huang.
Leading auto supplier Magna International in Canada currently produces vehicles for other companies, and China's Geely has expressed interest. China's Guangxi Automobile Group has begun producing EVs under contract for Sagawa Express Co., a Japanese delivery company.
In order to attract customers, Foxconn is relying on its Mobility in Harmony EV platform, or MIH. In an effort to standardize technologies and enable the quick and low-cost development of model variants, it refers to MIH as "the Android system" for EVs and is actively seeking partners.
"We want to create that kind of ecosystem so anyone - for example, like United Airlines – can say, 'I want to make a car,'" Foxconn chief product officer Jerry Hsiao told Reuters during a tour of the company's sprawling Ohio plant.
"Sooner or later, maybe the top, traditional (automakers) say, 'Hey, I want to become a product marketing company. Why do I need to carry so many employees?'" he said.
Hsiao, who previously worked on Google's first Android phone, believes that the commercial trajectory of EVs is currently at a crossroads.
The goals of Foxconn are aggressive. Foxconn's longer-term objective is to produce nearly half of the world's EVs, with an initial target of 5% of the global EV market and the equivalent of $33 billion in revenue from manufacturing EVs and components by 2025.
EV sales have increased, with China leading the way. Assuming a 20% EV adoption rate by 2025, 5% of the market would be roughly 900,000 vehicles, or about what market leader Tesla sold in 2021.
"In the EV market, everyone's eyes are bigger than their stomach," said Sam Fiorani, vice president at AutoForecast Solutions.
His company projects that Foxconn will produce between 65,000 and 157,000 vehicles between 2025 and 2026. They don't produce iPhones here, he declared.
According to Goldman Sachs, the outsourcing of EVs will reach $36 billion in 2025 and $144 billion in 2030, with 800,000 and 3.2 million EVs, respectively.
Foxconn's Ohio plant, which currently produces a small number of electric Endurance pickup trucks for Lordstown Motors, in which it has invested, will need to land its first significant customer in order to succeed. It has made plans to produce a car for EV start-up Fisker public.
Foxconn Chairman Liu Young-way told reporters last month that he intends to travel to Mexico, where Foxconn has made significant investments in the production of auto parts, as well as Ohio, where Foxconn has a plant, in March or April.
"There should be some related signing activities," Liu said.
Foxconn already provides Tesla with parts and produces camera modules for suppliers and automakers.
"They can probably buy things cheaper than anyone on earth," Raymond Tsang, a Shanghai-based partner at consultancy Bain & Company, said of Foxconn.
The stakes are raised by the competition for volume in an industry where Tesla and other EV manufacturers are lowering prices.
One of the highest volume single-line vehicle assembly plants in the world is the former GM facility in Ohio that Foxconn acquired from Lordstown Motors. Without overtime, it could produce about 320,000 vehicles annually.
Approximately 300,000 electric vehicles will be produced at the facility by Foxconn, according to Ian Upton, director of production control at Foxconn Ohio.
"We would love to find a customer that's in the 250,000-or-so range and then we can fill up some of the other stuff with niche type things," he said.

Christopher J. Mitchell

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