Why Foxconn needs to be in a hurry to become a significant global EV player

Foxconn wants to do for electric vehicles what it has done with the iPhone, but first, it needs to find the next Apple — and fast.

The Taiwanese contract manufacturer faces competition in the market for creating white-label EVs that can be tailor-made for clients, whether that is a major car maker or a delivery provider or any other company.

And while the electronics company brings established strengths to the mostly loss-making EV industry, Foxconn needs to win a big contract to prove it can ride the wave of disruption, analysts say.

Foxconn, formally called Hon Hai Precision Industry Co, will provide an update on its EV manufacturing business when it reports results on March 15.

“The results of many of our collaborations will be realised 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 auto makers have and are pivoting to finding solutions for mobility that are cleaner and smarter.”

The company's proposition is simple: Let us build your next EV. It is developing a specialised supply chain, including chips and batteries, and has acquired the former General Motors plant in Lordstown, Ohio. It has also hired a former Nissan executive, Jun Seki, to lead its efforts.

For now, by building in Ohio, Foxconn can offer customers access to US federal incentives under the Inflation Reduction Act, Daiwa Capital Markets analyst Kylie Huang said. That is a selling point as traditional car makers juggle building petrol-powered vehicles with plans to build their own EV capacity.

“If they don't get one this year, next year will be more difficult,” Ms Huang said of Foxconn's search for an EV contract with a traditional car maker.

Failure to “catch this wave” could force Foxconn to vie with lower-tier Chinese car makers that might switch to EV contract manufacturing and compete on cost, Ms Huang said.

Canada's Magna International, a top car supplier, already builds vehicles for others, and China's Geely has expressed interest. China's Guangxi Automobile Group has started to make EVs on contract for Japanese delivery company Sagawa Express Co.

Foxconn is counting on its Mobility in Harmony EV platform, or MIH, to win customers. It calls MIH “the Android system” for EVs and is soliciting partners in an effort to standardise technologies so model variants can be developed quickly and cheaply.

“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 [car makers] say, 'Hey, I want to become a product marketing company. Why do I need to carry so many employees?'” he said.

Mr Hsiao also worked on the first Android phone for Google and now sees EVs at a similar commercial inflection point.

Foxconn's ambitions are aggressive. Initially aiming for 5 per cent of the global EV market and the equivalent of $33 billion in revenue from manufacturing EVs and components by 2025, Foxconn's longer-term goal is to make nearly half the world's EVs.

EV sales have been rising, led by China. Five per cent of the market, assuming an EV adoption rate of about 20 per cent by 2025, would be about 900,000 vehicles, roughly 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 firm estimates Foxconn hitting about 65,000 vehicles in 2025 and 157,000 in 2026. “They're not making 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, Goldman Sachs estimates.

Key for Foxconn will be scoring the first big customer to anchor its Ohio plant, which currently builds a small number of electric Endurance pickup trucks for Lordstown Motors, in which it owns a stake. It has announced plans to build a vehicle for EV start-up Fisker.

Foxconn Chairman Liu Young-way told reporters last month he plans to visit US customers, Foxconn's Ohio plant and Mexico, where Foxconn has made significant investments in car parts, in March or April. “There should be some related signing activities,” Mr Liu said.

Foxconn already supplies parts to Tesla and makes camera modules for car makers and suppliers. “They can probably buy things cheaper than anyone on earth,” Raymond Tsang, a partner at consultancy Bain & Company, said of Foxconn.

The race for volume in an industry in which Tesla and other EV makers are cutting prices raises the stakes.

The former GM plant in Ohio that Foxconn purchased 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, excluding overtime.

Foxconn wants to build about 300,000 EVs at the plant, Ian Upton, director of production control at Foxconn Ohio, told Reuters. “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.