Hon Hai Precision Industry Co (鴻海精密) on Thursday said it plans to sign a framework agreement with automaker Fiat Chrysler Automobiles NV to form a joint venture that would tap into the electric-vehicle industry.
The world’s largest contract electronics maker and Fiat Chrysler would focus on developing and producing battery electric vehicles, a filing with the Taiwan Stock Exchange said.
The venture, in which Hon Hai would hold at most a 40 percent stake, would combine the innovative spirit and strengths of both companies, while focusing on businesses that apply the Internet of Things to the automotive industry, Hon Hai said.
Fiat Chrysler, which agreed to merge with Peugeot and Citroen owner Group PSA in October last year, would be in charge of traditional manufacturing.
Hon Hai and Fiat Chrysler plan as a first step to manufacture electric vehicles in China for the local market, it said.
While Hon Hai’s announcement might take the market by surprise, chairman Young Liu (劉揚偉) more than hinted at the company’s interest in the automobile industry more than two months ago.
“We are targeting electric vehicles, digital health and robotics as the three industries are estimated to reach US$1.2 trillion to US$1.3 trillion by 2025,” Liu told an investors’ conference in November last year.
Ambitious in his approach, Liu said that he aims to capture up to 10 percent of the market share in the electric-vehicle industry by 2025, or US$130 billion, as well as the digital health and robotics industries, through investments of about NT$10 billion per year over the next two to three years.
Hon Hai, known internationally as Foxconn Technology Group (富士康科技集團), seeks to diversify from its role as the assembler of a swathe of the world’s electronics, from Apple Inc’s MacBook to Sony Corp’s PlayStation.
The company would employ its expertise in precision manufacturing and supply-chain management to grow the automotive business to 10 percent of its revenue over the long term, Liu told Bloomberg News.
“Hon Hai will be responsible for the design, components and supply-chain management,” he said in a text message, adding that the company would not expand into vehicle assembly.
Hon Hai and Fiat Chrysler are focusing on the Chinese market because of sheer volume, Liu added.
While Chinese consumers buy more electric vehicles than anywhere else in the world, sales have slumped since the government pared back subsidies amid a broader downturn in market demand.
Hon Hai relies on Apple for about half of its sales. Past attempts to diversify its product lines have not been entirely successful. The company has tried to invest in a number of electric-vehicle ventures, but none has borne fruit.
Hon Hai, which competes globally with companies such as Flex Ltd and Jabil Inc, might now be counting on transferring years of experience in manufacturing consumer electronics to an automotive arena that is increasingly going high-tech.
“As autos get more and more electrified and more and more digital components replace mechanical ones — especially with EVs [electric vehicles], but also just traditional vehicles — there’s scope for a real opportunity here,” Bloomberg Intelligence analyst Matthew Kanterman said. “Vertical expertise is key in auto, and so a deal like Fiat Chrysler — if it proves successful — can help unlock doors for Hon Hai, as that would be a strong reference account.”
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