Buzz
The world never stops evolving
Speculations about an Apple electric car have kept investors and iPhone enthusiasts on the edge for a long time. Despite a decade of leaked information, the project remains shrouded in mystery. However, this hasn't deterred other consumer electronics companies from forging ahead. On the other side of the globe, people will soon be placing orders for a mode of transportation from Foxconn - the Taiwanese company specializing in Apple devices.In October 2021, Hon Hai Technology Group, globally known as Foxconn, unveiled plans to manufacture three electric vehicles in collaboration with Yulon, a Taiwanese automaker, under the brand Foxtron. Foxconn, responsible for assembling 70% of iPhones, harbors similar ambitions for the automotive industry: to become the chosen manufacturer for an entirely new kind of car. To date, Foxconn has secured contracts to produce vehicles for two U.S.-based electric startup companies, Lordstown Motors and Fisker.Foxconn's own vehicles - a hatchback, a sedan, and a bus - may not exude the luxury of Apple products, but they signify a significant leap for the company. The ambitious expansion plans of Foxconn also reflect a larger shift in the automotive world, encompassing technology and geography. The U.S., Europe, and Japan have defined what automobiles are for the past 100 years. Now, the ever-evolving nature of cars in electrification, computerization, and autonomy suggests that China might have a growing influence in shaping the automotive market. If Foxconn succeeds in becoming a major car manufacturer, it could contribute to positioning China as a formidable player, potentially overshadowing automotive powerhouses like the U.S., Germany, Japan, and South Korea.
Favorable timing, strategic advantages
The automotive industry is undoubtedly poised for significant transformations in the upcoming years. A report in October 2020 by McKinsey concluded that automakers will need new ways to sell cars and generate revenue through applications and subscription services. The car of the future resembles a smartphone on wheels. This partly explains why now is the opportune time for electronic manufacturers to venture into the automobile realm. The drivetrain of electric vehicles is much simpler than internal combustion engines, with fewer components and assembly steps. The supply chain for electric cars is also simpler than traditional ones, a core competitive advantage for traditional car manufacturers. China currently boasts a robust electric vehicle ecosystem, from batteries to software, and the capability to manufacture car components.Chinese Passenger Vehicle Association4.1%approximately 10%
Consumer electronics manufacturers view the automotive sector as their domain, capitalizing on the increasing computerization and connectivity of modern vehicles. Traditional automakers are slower to adapt to new potentials and capabilities from software and connectivity. Meanwhile, companies like Apple, beyond the rumors of a car project, are developing premium entertainment software. Alphabet invests millions in developing software for its self-driving cars through subsidies for Waymo. Several tech giants are designing their own vehicles - in March, Sony announced plans to make electric cars with Honda.But if the above is just a matter of interest, in China, everything related to electric cars is bubbling. Huawei, Tencent, Alibaba, and others have software development deals with car manufacturers. Xiaomi announced plans last October to produce four electric car models. Oppo also reportedly has similar ambitions. Earlier this month, JiDU, a subsidiary of carmaker Geely and search giant Baidu, unveiled its first car, the ROBO-1. Baidu has heavily invested in artificial intelligence for autonomous driving, encouraged by the Chinese government. The combination of electric cars and autonomy creates numerous opportunities for companies like Foxconn, Xiaomi, or similar entities.
The shift to electric vehicles could profoundly impact trade relations between the European Union and China in the coming years, potentially transforming the EU from an automotive exporter to an importer. While most Teslas are produced in China for export, domestic Chinese manufacturers are catching up. Shanghai-based NIO is reportedly building manufacturing plants in the United States and Europe. Foxconn also plans to produce cars at a large plant in Ohio, USA, formerly owned by GM.Hurdles to Overcome
However, challenges persist. Foxconn's strength lies in mobilizing labor for assembling complex devices, fundamentally different from high-level automation in the automotive manufacturing industry. Foxconn has faced difficulties in integrating robots into production lines in the past. Electric cars, with fewer parts and details, are easier to manufacture than traditional vehicles. Still, producing a sufficient quantity of cars to a certain standard is a particularly challenging task, with slim profit margins.
