Compilation / Zhang Ou
Edit / Qian Yaguang
Design / Zhao Haoran
Source: CNBC, Tech Crunch, CNN
Since 2020, Taiwanese electronics giant Foxconn has plunged headlong into the dream of car manufacturing.
First, despite being known for its iPhone foundry, it has nothing to do with Apple's automotive project.
In October 2022, at the Technology Day of Hon Hai Precision Industry Co., Ltd., founder Terry Gou and chairman Liu Yangwei attended and launched new models Model B and Model V after the Model C, Model E and Model T in 2021.
Executives highlighted their ample chip supply, saying Hon Hai aims to manufacture 5 percent of the world's electric vehicles by 2025 and to increase that share to 40 to 45 percent in the future. That said, they hope to replicate the success of the iPhone and become the largest foundry in the electric vehicle space, building cars for major car brands like Tesla.
Bill Russo, founder and CEO of Automobility, an automotive industry consultancy, believes Foxconn's foray into electric vehicles is a smart move.
The company has already had great success with capital-intensive electronics manufacturing and is perfectly capable of doing the same for electric car brands. For startups, this is the most attractive way to reduce initial investment.
In addition, the new generation of cars is smarter than ever and requires more electronic components. "These cars have a lot of screens and chips, which is what Foxconn does best." Russell said.
Gou Tai Ming Platform, Release Model B (Credit: I-Hwa Cheng/Bloomberg/Getty Images)
Stepping stone to the U.S. market: Lordstown
In the U.S., two of the hottest EV startups, Rivian and Lucid, have made a lot of cash through SPAC listings and have spent heavily to build their own factories and move into mass production. However, not all start-up companies are so lucky.
According to Nasdaq, in the Wall Street electric car boom in recent years, there is one company name that has been shorted the most, Lordstown, with more than 60% of the shorts. On a March 6, 2023 basis, the EV rookie's share price was just $1, significantly behind the September 2020 high of $29.
In November 2021, Foxconn struck a deal with financially troubled Lordstown to buy its Ohio plant for $230 million, first getting itself a ticket to fast-track into the U.S. car manufacturing world.
A year later, the company increased its investment in Lordstown by purchasing $170 million of common stock and newly created preferred stock, with an 18.3 percent stake, becoming its largest shareholder.
In September 2022, Foxconn began production of Endurance pickups for Lordstown at its Ohio plant, with deliveries starting in November. As of February 2023, a total of about 40 pickup trucks have been manufactured. But Lordstown said Feb. 23 that it suspended production of Endurance and recalled 19 pickups.
Initially, the reason for the recall was the presence of problematic electrical components in the Endurance that could have caused the vehicle to lose power. However, after the recall, Lordstown was told by another supplier that a component of the pickup truck's braking system did not meet specifications. They are working with suppliers to analyze the root cause of problems and potential solutions, including modifications, retrofits, and software updates for component designs.
Lordstown Endurance
At the end of 2022, Lordstown has $221.7 million in cash and short-term investments on hand. In early March 2023, the company reported fourth-quarter earnings, widening its net loss to $102.3 million from $81.2 million a year ago.
President and CEO Edward Hightower said on the earnings call: "If we do not find a partner in the coming months, we may have to suspend commercial production of Endurance until a partner comes along." ”
As things stand, the cost of materials to produce Endurance is significantly higher than its selling price. Lordstown only signed a contract manufacturing agreement with Foxconn and did not agree on any investment plans for Endurance, so Foxconn was only responsible for production, and all costs of developing the car were borne by Lordstown.
According to a March 6 filing with federal regulators, Lordstown again expressed great doubts about its ability to continue operating. "If we don't raise significant additional funding in 2023, our ability to produce Endurance and develop future car projects will be significantly curtailed," it said. ”
This isn't the first time they've had a business crisis, but the tenacious startup has announced that it is partnering with Foxconn on a second model in an attempt to bring some good news to investors. The two companies will also jointly develop future vehicles based on Foxconn's Mobility-In-Harmony (MIH) platform.
"Our asset-light business model and partnership with Foxconn's electric vehicle ecosystem, including MIH, will provide Lordstown with the opportunity to create electric vehicles that are suitable for a variety of applications, while achieving cost-effectiveness at scale," Hightower said in a statement. ”
Foxconn's Wisconsin plant under construction (Credit: Mark Hertzberg/ZUMA Wire/Shutterstock)
However, in the eyes of Wall Street, Foxconn's capital injection can only provide a short life extension for the dying company. Foxconn's investment reputation also raises questions about Lordstown's prospects.
Back in 2017, Foxconn announced an investment of $10 billion in Wisconsin to build the world's most advanced panel factory, which is expected to bring 13,000 local jobs. Then-U.S. President Donald Trump even called the project "the eighth wonder of the world." However, several years have passed, the factory has not yet been completed, and from time to time there are reports of changes in the content of the project content of the plant. In September 2022, Foxconn significantly reduced its investment to US$672 million.
In 2021, Foxconn signed a strategic cooperation framework agreement with Byton, a new Chinese automaker, to help Byton's first model, M-Byte, in the mass production plan, as Byton's funds ran out, Foxconn chose to stop the loss in time after only 8 months, and the cooperation fell through.
Will Lordstown, whose life and death are uncertain, get the same tragic script?
Spread the net layout cooperation
In November 2022, news came from Germany that the Volkswagen Group was negotiating with Foxconn.
Originally a brand owned by International Harvester in the United States, Scout was discontinued in 1980 due to labor disputes and the energy crisis of 1979. In 2022, Volkswagen decided to invest $100 million to revive it, focusing on the US market.
In March 2023, the brand announced a $2 billion investment to build a factory in South Carolina, but details about the supply chain and component suppliers have not been disclosed.
Initially, Scout plans to partner with Foxconn and car manufacturing giant Magna to produce its new pickup trucks and SUVs. However, talks with the two companies ended earlier this year, and it is unclear whether there will be new possibilities for cooperation or if negotiations with other manufacturers will begin.
In December 2022, vehicle software service provider Sonatus announced a $75 million Series B funding round led by Foxconn.
Sonatus is committed to providing foundational technologies and solutions to help customers and partners accelerate the transition to the software-defined vehicles era and help create diversified solutions.
In early 2023, Foxconn and NVIDIA announced a strategic partnership to jointly develop an autonomous vehicle platform.
As part of the agreement, Foxconn will produce electric vehicles based on NVIDIA's DRIVE Orin chip and DRIVE Hyperion autonomous driving platform to achieve highly automated driving capabilities.
In addition to Lordstown, Foxconn has also signed contract manufacturing agreements with other electric vehicle upstarts. They plan to produce their second model, Pear, for Fisker at their Ohio plant starting in 2024, and will also assist California-based startup Indi EV in building the prototype Indi One. Not just passenger cars, Foxconn even plans to produce its first all-electric agricultural tractor, the Monarch MK-V, at the plant for tractor manufacturer Monarch.
It's unclear how much Foxconn's own engineering will be shown in these vehicles. A Fisker spokesperson said Pear may have some components or software from the company, but the models are still mostly designed by them.
Ohio plant (Credit: REUTERS/Quinn Glabicki/File Photo)
From the production and development of electric vehicle platforms to autonomous driving and software solutions, Foxconn is casting a wide net and comprehensively laying out its own car manufacturing dreams.
Tu Le, founder and CEO of Sino Auto Insights, an automotive industry consultancy, said: "In the next 24-30 months, there will be a lot of asset-light EV startups in the U.S., and they need a capable factory that can sell them finished products at wholesale prices. But first, Foxconn must prove that it can produce electric SUVs and pickups to the same standards as iPads and iPhones. ”
He believes that if the first cars rolled off the assembly line in Ohio meet the highest quality, reliability and safety standards that Americans expect, then Foxconn has a host of opportunities in front of it.
Given that the production of the first batch of Lordstown Endurance has not gone well, Foxconn still has work to do to get through the first hurdle of building a car.
This article was originally produced by Automotive Business Review
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