For years, consumer electronics products designed and sold by familiar household brands have been made by contract manufacturers, whose names do not appear on the box. Indeed, products such as printers and mobile phones are made in overseas factories by companies most people have never heard of. Foxconn might, however, be one of the few contract manufacturers some people may be familiar with.
The Taiwanese company has churned out countless iPhones for Apple over the years. But this week, in announcing the development of three prototype electric vehicles (EVs), Foxconn is stepping out of the shadows. And in doing so, it is potentially signposting how the auto industry may be disrupted, with a non-traditional player getting into the automobile manufacturing business.
Unlike the consumer electronics business, the automotive industry has generally kept both design and manufacturing in-house. True, car makers routinely use common third-party component suppliers, but the final product is not typically subcontracted out. Fords are made in Ford factories, for example, and it’s quite a proprietary business.
Foxconn’s foray into the auto industry potentially changes this paradigm as it seeks to build its own brand as well as follow its existing contract manufacturing sensibilities.
And in the EV space, this begs the question: To what extent is building EVs more akin to assembling consumer electronics products, than building traditional internal combustion engine-powered cars?
Obviously, building cars is not the same as making phones, but Foxconn evidently sees significant synergies for it to make sense.
Often when disruptive technologies emerge, industries established doing one thing, bleed into areas not typically associated with their core business.
Consider Amazon, which during the course of developing its huge online marketplace, realized its data centers could support web-hosting services which it could sell to other companies. As this proved a success, Amazon encroached on an area of business traditionally occupied by information technology companies.
Foxconn’s move to build EVs could similarly prove to be electronics contract manufacturing bleeding into the traditional auto manufacturing space and in doing so, start to reshape it.
If that’s the case, it’s a key development, but in any case, it’s another chapter in the evolution of an industry already pensive about its future.
Years ago, Ford reframed itself as a mobility company, foreseeing a time when car ownership would likely diminish especially with autonomous vehicles on the horizon, combined with micro-mobility trends. The company realized it couldn’t ignore mobility as a service, despite the fact that car making would remain fundamental to its core business for the foreseeable future.
Foxconn, too, clearly sees an opening as the auto industry shifts. As vehicles increasingly become computers on wheels, its core electronics contract manufacturing competencies lend themselves to branching out into a legacy industry in flux.
But as competition evolves in the automotive and transportation space a significant amount of risk will be taken.
Bear in mind, it’s hugely difficult to successfully launch a car company because it’s very capital-intensive and the market is already well supplied. Tesla is one of the few automakers to successfully manage it in recent history. So, Foxconn has not chosen an easy path to tread.
But operating as a contract manufacturer appears to be part of its business approach, distinguishing itself from the in-house auto making model mentioned earlier.
Indeed, one of the three EV prototypes Foxconn announced this week is a performance sedan with a 400-mile range, which is going to be sold by an unspecified car-maker outside of Taiwan.
Furthermore, earlier this year, it was announced that Foxconn has partnered with Fisker to build an electric car under the Fisker brand in the United States.
That company has already learned how hard it is to launch a successful car business. An early player in the premium plug-in hybrid space at the start of the 2010s, Fisker faltered around the time Tesla began to take off. Maybe Fisker will be successful a second time around in partnership with Foxconn, which is already a large, well-financed company able to leverage its contract manufacturing competences. (Note the Fisker Ocean, the company’s compact EV crossover, shown above.)
Notably too, Foxconn has bought the struggling Lordstown Motors plant in Ohio, after that company faced setbacks in bringing its electric pickup truck to production on its own.
But as well as Foxconn’s partnerships with other companies, it has aspirations to build its own brand too.
One of the three EVs it announced this week will be an electric bus capable of driving 250 miles per charge, which will be sold under a new brand, Foxtron, and made in partnership with a Taiwanese auto company, Yulon Motors. The involvement of the latter signifying auto-making expertise is still important to have on board, too! A crossover SUV is also in the lineup which will be sold under its own brand.
Expectations are high. Foxconn believes moving into the EV business will be a $35 billion opportunity over five years with the electric bus expected to be the first of the prototypes to go into production.
Whether Foxconn is successfully able to compete remains to be seen. It can take a decade to build a brand reputation in the auto industry, and the company has yet to build its own brand recognition. Launching the Foxtron brand starts this process, while the company hedges its bets in making vehicles in partnership with other car companies.
All this potential opportunity, of course, is unlocked by vehicles going electric, blurring lines between industries and showing that the EV world is still very much in flux.
Image credit via Fisker
Phil Covington holds an MBA in Sustainable Management from Presidio Graduate School. In the past, he spent 16 years in the freight transportation and logistics industry. Today, Phil's writing focuses on transportation, forestry, technology and matters of sustainability in business.
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