Foxconn is building an electric car factory next to where it makes iPhones

admin admin | 08-15 16:20

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.
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 canceled its long-standing project to develop electric cars after plowing more than USD 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 chair of private equity firm Kirkland Capital.

Foxconn has set out to become a major player in a crowded field.

More than 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 EVs 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 bestselling 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.

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