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Foxconn has set out to become a major player in a crowded field. | Photo: Reuters
The core of Foxconn’s business is in Zhengzhou, the capital of Henan province in central China, known as “iPhone City.” That’s where a network of suppliers, infrastructure and factories, and sometimes as many as 250,000 Foxconn employees, manufacture most of the world’s iPhones for Apple.
Now Foxconn, a Taiwanese electronics giant, is planning to build a new, 700-acre campus in Zhengzhou to make electric cars.
The question is, who will be the customers?
In February, Apple cancelled its long standing project to develop electric cars after plowing more than $10 billion into it. Many of its rivals in China have charged ahead. For Foxconn, the investment in Zhengzhou is part of a broader push to reduce its dependence on Apple. Sales of iPhones in China have slumped, and Apple and other American device makers have shifted some manufacturing to other countries.
Foxconn plans to make cars designed and sold by other companies, the way it has made iPhones for Apple. So far it has won orders from Luxgen, a subsidiary of a Taiwanese automaker it has partnered with to make a limited number of buses and cars.
“They need a breakthrough, which means finding a major customer,” said Kirk Yang, the chairman of private equity firm Kirkland Capital.
Foxconn has set out to become a major player in a crowded field.
Over 130 companies sold electric vehicles in China last year, said Stephen Dyer, head of Asia Automotive at AlixPartners. The firm expects fewer than 20 of them will be profitable by the end of the decade.
The United States and the European Union have set steep tariffs to keep Chinese electric cars out. The intense competition has sparked a price war that has pushed even Tesla, the American company that is a leading manufacturer and seller of E.V.s in China, to discount.
And in China, the line between smartphone makers and car companies has increasingly blurred. Huawei and Xiaomi, two of the companies that have eclipsed Apple among the country’s best selling smartphone brands, already sell electric cars. Days after Foxconn announced its investment in the Zhengzhou electric vehicle facility, Xiaomi broke ground on its second.
Foxconn executives say that the factors that enabled the company to make iPhones faster and at a lower cost than its competitors will translate to success in the auto industry. That includes the manufacturing power and government support the company has built up in Zhengzhou. Perks like roads, power plants and tax breaks played a central role in Foxconn’s success as an Apple supplier. When a Covid-19 outbreak threatened output ahead of the 2022 holiday shopping season, local officials pitched in to keep the iPhones moving off the factory floor.
But analysts question whether manufacturing power will be enough to help Foxconn stand out in China’s crowded market.
“What’s leading Chinese E.V. players to win in the market is not necessarily manufacturing, it’s more about the software and technology that they are offering to consumers,” said Mr. Dyer, who was previously an executive at Ford Motor in Shanghai.
And when it comes to cars, reliability and safety matter to customers as much as low prices. “If a consumer electronic device crashes, it crashes,” said Mr. Yang. “But a car malfunction can be fatal.” Foxconn has invested hundreds of millions of dollars in E.V.-related manufacturing in Southeast Asia.
At home in Taiwan in 2021, Foxconn set up a joint venture with the Taiwanese carmaker Yulon Motor to make luxury sedans, sport utility vehicles and buses under the name Foxtron. On Wednesday, Foxconn said it had delivered 5,400 cars for Yulon this year.
Foxconn’s limited output to date is not near the scale it would take to compete with China’s top electric car makers. “You can hand build those at that volume,” said Tu Le, a managing director of the consultancy
Sino Auto Insights.
First Published: Aug 15 2024 | 10:31 PM IST
