Fiat Chrysler and Foxconn Join Forces to Enter the Electric Vehicle Market

[Image source=Reuters Yonhap News]

[Asia Economy Reporter Jeong Hyunjin] Fiat Chrysler Automobiles (FCA), an Italian-American joint automobile manufacturer, and Taiwan's Hon Hai Precision Industry (Foxconn), Apple's largest partner, have joined hands to enter the electric vehicle market. Both companies have decided to focus on the electric vehicle business due to deteriorating profitability.

According to the Wall Street Journal (WSJ) and others on the 16th (local time), FCA and Foxconn agreed the day before to establish a joint venture responsible for developing and manufacturing electric vehicles. The formal contract is expected to be completed by the end of March, but specific details such as scale have not been disclosed. However, it is reported that FCA's investment ratio will be 50%, and Foxconn's will not exceed 40%. The remaining 10% stake is being discussed to be held indirectly by Foxconn. The joint venture is planned to be established in China, with plans to develop the local market first and then export products to the global market.

The reason the two companies decided to establish a joint venture is to improve profitability through new business. Both FCA and Foxconn are currently struggling with deteriorating profitability. While automobile sales in China, the world's largest automobile market, have declined for two consecutive years, FCA is struggling in the Chinese market. In response, FCA decided last month to merge with the French automobile manufacturer Peugeot Citro?n (PSA), growing into the world's fourth-largest automobile manufacturer. Foxconn has been mass-producing Apple iPhones in China and shipping them to the global market, but since 2016, iPhone sales have declined, reducing profits. This is due to longer device replacement cycles among smartphone users, resulting in less demand for new products, as well as intensified competition among smartphone manufacturers.

Both companies have continuously expressed their intention to expand their electric vehicle business. FCA declared during the merger with Peugeot that it would increase investment due to the rapid growth of the electric vehicle market. FCA plans to launch its first small electric vehicle with 500 units this year.

Foxconn's Chairman Liu Yangwei, who took office in June last year, also expressed his intention to strengthen the electric vehicle battery business. During a conference call in November last year, Chairman Liu mentioned the electric vehicle market as a focus area for future profitability enhancement. A Foxconn official said, "We want to create a universal chassis that can be applied to various electric vehicle manufacturers," adding, "We will discuss with car manufacturers and electric vehicle startups."

This content was produced with the assistance of AI translation services.