Hon Hai Technology Group (Foxconn) has taken another significant step into the electric vehicle (EV) market by signing a contract manufacturing agreement and a joint venture agreement with Lordstown Motors (LMC).
After the two parties entered into an asset purchase agreement (APA) on Nov 11 last year regarding LMC's production plant in Lordstown, Ohio, Foxconn on May 12 said it has completed the facility purchase and that Ohio will be its important EV manufacturing hub in North America, according to its press release.
LMC is an OEM of electric light-duty trucks focused on the commercial fleet market. With LMC's production lines, Foxconn can start to promote wholly assembled EVs. It does not need to worry about orders because LMC's Endurance, an eletric truck model, can be its starting point.
On the heel of the LMC announcement, Fisker announced that it will produce its second vehicle, the Fisker PEAR, at Foxconn's factory in Ohio, according to its statement.
"The Fisker PEAR will enter production in 2024. Both the Fisker and Foxconn teams are fully engaged and expect to build a minimum of 250,000 Fisker PEAR units a year at the plant after a ramp up period," Fisker said.
What is really lucrative for Foxconn is its JV agreement with LMC. Through the agreement, Foxconn will invest US$55 million and hold 55% of the JV. The two parties will jointly design and develop commercial EVs for the global market. Most importantly, the new models will be built through the Foxconn-led Mobility in Harmony (MIH).
During an investors' conference on May 12, Foxconn chairman Young Liu said the company will move from developing wholly assembled cars, vehicle modules to key components. Considering electronics assembly is a low-margin activity, it seeks to develop key vehicle components in the long run, he said.
However, EVs are far more sophisticated than cellphones. How to persuade buyers to use newly developed vehicle modules and components will be no easy task for Foxconn and its partners.
The establishment of MIH consortium may solve the problem.
For Foxconn, the JV provides a customer base for MIH members. While developing EVs with its partners, Foxconn can test new modules and components contributed by MIH members. Liu said a startup has expressed the hope to install its in-wheel motor design into a passenger car. Meanwhile, Foxconn can also learn from LMC in making electric motors and battery.
Foxconn has also embarked on the developments of LiDAR and battery, as well as software-related solutions, sources familiar with the matter said.
The JV company is also conducive for LMC's growth. Once it develops new EVs with MIH, it can distribute the models and their components through the consortium's channels across the world.
Once Foxconn, LMC, and Fisker succeed in launching new EVs, Foxconn can enhance its gross profit margin and its market share in the global EV market. At the same time, MIH members will establish their reputations and perhaps attract more carmakers and startups to join the consortium.
Deals signed by Foxconn and LMC
Asset purchase agreement
Signed on Nov 11, 2021
LMC's plant to be Foxconn's first EV production base in North America.
About 400 of LMC's employees to become Foxconn's staff.
Contract manufacturing agreement
Signed on May 12, 2022
LMC to become Foxconn's first client of commercial EVs once they are mass-produced; the plant to start making electric trucks in 2H22. Foxconn to supply certain vehicle parts.
Joint venture agreement
To co-design commercial EVs through MIH platform; Foxconn to invest US$55 million and hold 55% of JV; to provide OEM clients with lower-cost production and shorter lead time.
Source: Hon Hai Technology Group, compiled by DIGITIMES, May 2022