The world's largest contract electronics manufacturer, Foxconn, is exploring new horizons by venturing into the electric vehicle (EV) market. This strategic shift began in 2020 when the company announced its intention to enter the EV sector. Now, Foxconn is considering a significant move by acquiring a stake in Nissan, aiming to deepen its expertise and market presence in automotive manufacturing. The potential partnership reflects both companies' needs for growth and stability in an increasingly competitive industry. While Foxconn seeks to diversify beyond consumer electronics, Nissan looks for support following failed merger talks with Honda. Despite challenges in achieving market share targets and facing trade risks, this alliance could offer mutual benefits and reshape the future of automotive production.

Back in 2020, when Foxconn declared its intention to delve into the electric car business, the decision was met with understanding and anticipation. Contract manufacturing for electronics is notorious for being a high-pressure, low-margin endeavor. Rumors abounded that Apple, Foxconn’s primary client, was working on its own electric vehicle. By leveraging its mass-production capabilities in the automobile sector, Foxconn aimed to safeguard itself against the commoditization of consumer electronics. Today, as the world’s leading contract electronics manufacturer, Foxconn is contemplating advancing this strategy even further by expressing interest in collaborating with Nissan. Such a partnership would be mutually beneficial. For Nissan, it presents an opportunity to gain much-needed support after its merger discussions with Honda collapsed. Meanwhile, Foxconn stands to acquire invaluable manufacturing knowledge and access to new markets.

Progress in Foxconn's electric vehicle aspirations has been steady but not without hurdles. The company has already partnered with Stellantis to design automotive chips and invested in developing its EV battery supply chain. Initially, Foxconn set an ambitious goal of capturing 5% of the global EV market by 2025, which could have generated approximately $31 billion in revenue, a substantial increase from its current $210 billion annual revenue. However, many of these initiatives are still in their nascent stages, and achieving meaningful market share remains challenging. The delay in meeting its market share target underscores the difficulties of transitioning from consumer electronics to the capital-intensive and slower-moving automotive industry. Weak demand and inherent complexities contribute to these delays. Additionally, looming tariffs pose a significant risk. Although Foxconn has expanded its manufacturing footprint to include the United States, much of its operations remain concentrated in China and Mexico. Given its heavy reliance on US clients like Apple, shifts in trade policy and supply chain disruptions present considerable vulnerabilities.

In recent times, shares of Hon Hai, Foxconn’s listed entity in Taiwan, have surged by 80% over the past year. This rise, however, is more attributable to the strength in its artificial intelligence server, cloud, and networking products division rather than its EV ambitions. This division remains the company’s primary growth driver. The potential collaboration with Nissan could provide Foxconn with valuable industry insights and experience. Nevertheless, the EV market is highly competitive and capital-intensive. It will be crucial for Foxconn to ensure that this expansion is seen as a smart business move rather than an overreach that might erode value. As both companies navigate their respective challenges, the outcome of this potential partnership will undoubtedly shape the future landscape of automotive manufacturing.