Foxconn, the Chinese company that produces the Apple iPhone, wants to take on a similar role in the emerging electric vehicle market, creating a platform that EV startups could use and then producing their vehicles in one of its own factories.
Foxconn isn’t alone. On Thursday, California-based Fisker Inc. announced a similar deal with Magna International. The EV company will use a platform developed by the Canadian automotive mega-supplier, with Magna also agreeing to produce Fisker’s first product, the all-electric Ocean SUV, at its assembly plant in Graz, Austria.
“I believe most EV startups likely won’t survive because it’s hard to set up your own factory,” Henrik Fisker, the automaker’s founder and CEO, told TheDetroitBureau.com. By eliminating the need to invest hundreds of millions of dollars in developing a skateboard-like EV platform and, perhaps, another billion (dollars) for an assembly plant, he added, “We’ve de-risked our own program.”
Magna, Fisker said, is already talking with several other fledgling EV makers and, if the numbers add up, that could justify adding a second EV plant in North America.
Getting into the automotive business isn’t for the faint of heart, nor for those without deep pockets. Starting from ground zero can run up billions in costs, first for the development of a vehicle but then for the factory where they’ll be built.
Faraday Future is a good example. Five years ago it was being billed as a potential Tesla rival, unveiling a new battery-electric sedan and beginning construction on a new assembly plant outside Las Vegas. Then the bottom fell out as the company’s lead backer, Chinese entrepreneur Jia Yueting, ran into serious financial problems and reneged on the investment he promised. A series of subsequent deals collapsed and Faraday was forced to abandon the Nevada plant project. It has since lined up tenuous new financing and a smaller plant in California but analysts question whether it will ever get a vehicle into production.
Faraday is just one of several EV hopefuls that failed to make the transition from concept to production, at least in part due to a lack of the funding needed for a plant.
Some startups have been able to make it past that obstacle. Lordstown Motors was able to lock down an especially good deal to acquire the old General Motors plant in Lordstown, Ohio, where it is preparing to launch production of an all-electric pickup. Suburban Detroit-based Rivian also got a bargain when it agreed to take over the abandoned Mitsubishi assembly plant in Normal, Illinois.
But such deals are rare and most new EV makers will either have to raise enough capital to build a manufacturing
facility or find a partner. Nikola Motors is taking a hybrid approach. It is setting up a factory near Phoenix to build heavy-duty trucks that will run on either hydrogen or batteries. But it is also working to finalize a deal with General Motors that would see GM both provide a platform for, and then assemble, the Arizona-based company’s new Badger pickup truck.
With regulators around the world enacting stiff new standards on emissions and fuel efficiency – and, in many cases setting out plans to ban vehicles using internal combustion engines – there’s a flood of startups hoping to enter the market with battery and hydrogen-powered products. Nearly 200 are waiting for government approval in China alone, according to Michael Dunne, founder of ZoZo Go, an Asian automotive consultancy.
Many, even with government approval, would struggle to get into production, said Dunne.
And that’s where Foxconn hopes to come in. While it may be best known for assembling iPhones, it envisions itself as more of the Android of electric vehicles. Like Magna, the Chinese tech giant has developed its own EV architecture, dubbed the “MIH Open Platform.” An EV newbie could use that as the foundation for a vehicle of its own design. Foxconn also would build the ultimate vehicle at a plant it is setting up, it announced this week.
There are some downsides to this approach, analysts like Joe Phillippi of AutoTrends Consulting warn. For one thing, an EV company wouldn’t own all the intellectual property used in its vehicles. And it might have to compromise on key design and engineering elements, even share them with a potential competitor. It could limit a company’s control over its own future.
That’s why companies like Lordstown Motors, Rivian and, of course, Tesla, are determined to go things on their own.
Tesla has certainly learned the challenges involved in operating its own plants. It went through what CEO Elon Musk called “production hell” with the launch of its Model 3 a few years ago, and still suffers from serious quality issues on that sedan, as well as the newer Model Y SUV.
Despite its high stock price, Tesla has gone back to investors repeatedly to fund both product development and the launch of new plants in China, Germany and Texas. But it has significantly greater flexibility over what it will build, as well as when and where.
So, few would be surprised if nascent EV makers like Fisker and Nikola eventually set up their own plants – if they can first get off the ground with a little bit of help from contract manufacturers like Magna and Foxconn.