I’m sure you’ve heard of Foxconn, the Taiwanese electronics contract manufacturer well-known for producing iPhones and iPads for Apple. In addition to having Apple as a customer, Foxconn also counts as clients Amazon, Google, Sony, HP, Visio, Microsoft, and many other electronics hardware companies. It seems that Foxconn now has its sights set on manufacturing electric vehicles according to the Financial Times. But is a core competence in electronics hardware manufacturing useful for producing electric vehicles? Not only is it useful, but Foxconn chair, Young Liu, believes legacy automaker’s just-in-time manufacturing and logistics business model is entirely outdated for electric vehicle production.
It seems Foxconn will get its chance to disrupt vehicle manufacturing in the EV space given the partnerships formed with Stellantis and Fisker, as well as joint ventures with both Chinese and Taiwanese automakers. Of course if Apple develops an autonomous EV as I expect, Foxconn could be an assembler of Apple cars as well.
Which companies might have an electric vehicle production competitive advantage? Is it EV automakers utilizing electronic manufacturers like Foxconn for their vehicle assembly? Might it be modern EV companies like Tesla with their own internally developed manufacturing processes? Or might legacy automakers with decades of automotive manufacturing experience have more of an advantage in the production of electric vehicles?
I don’t know the answer today! But as an investor in companies developing EVs, this is a critical topic to study. It seems that manufacturing will be an important competency for any automaker selling EVs profitably together with high margins. For example, today’s microchip shortage is having an uneven impact across the auto industry. For some automakers, the impact of the chip shortage will eliminate over 1 million vehicles from their production schedule this year and reduce revenue by over $2 billion. But that level of microchip production pain will not be experienced by all automakers. In fact Foxconn’s chair, Liu, has cited this microchip shortage as an example of why the industry’s traditional supply chain model cannot work for electric vehicles.
However, legacy automakers would seem to have advantages in body and chassis manufacturing given the similarities between ICE vehicles and EV vehicles in these areas. But will this matter overall in a world where EVs contain one-third fewer components versus ICE vehicles? And will legacy automakers be able to swiftly develop competencies in producing vehicles involving high levels of vehicle electronic content with more software integration? Those automakers that can adjust will have a great chance to prosper in this rapidly approaching world of volume EV production.
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TaaSMaster, LLC is not a registered investment advisor or broker/dealer. All investment opinions expressed by TaaSMaster, LLC are from personal research and experience of the owner of the site and are intended as educational material. Although best efforts are made to ensure that all information is accurate and up to date, occasionally unintended errors may occur.