Foxconn To Build Battery Factory and Low-Cost EV

Following the announcement that Nevada has emerged as the chosen location for the Tesla Gigafactory and with its CEO, Elon Musk, mentioning that there is a possibility of a Tesla factory being set up in China itself, Foxconn has announced that it will be building a battery factory as well.

Foxconn, better known as the manufacturer of Apple’s iPhone and, of course, suicide safety nets and appalling work conditions, will invest US$814 million in Shanxi, in northern China. The company already has two factories in the area that produces robots and smartphones, and it appears that the Taiwanese manufacturing company is looking to diversify its business portfolio.

Foxconn has already ventured into an agreement with BYD to launch an EV car rental service and CEO, Terry Gou, was quoted in June as saying that he wants to produce electric cars for just US$15,000; to achieve that would require a significant reduction to the cost of the battery pack, which is the same reason that Musk wants to build the Gigafactory in the first place.

We wonder if this would affect Foxconn’s future relationship with Tesla, for which it currently builds minor components used in the Tesla Model S. The relationship appears dandy at the moment, for during a shareholders meeting in June, Musk enthused about expanding collaboration with Foxconn. “We do feel that with potential alliances like Foxconn, we could potentially expand our production faster than would otherwise be the case,” he said.

Whether Tesla’s envisioned car factory in China would use batteries from the Gigafactory, in which Tesla has partnered with Panasonic in a US$7 billion deal, or other local suppliers is yet to be known; but we would think that the whole point of building a gargantuan factory is to be able to produce batteries at such large quantities, pushing cost to such a low that no other rivals could compete. How Foxconn believes that its US$814 million investment is able to undercut rival Tesla’s US$5 billion, we’ll have to see...after all, how much lower can Foxconn push its labour costs.

Perhaps everyone is just attracted by China’s drive to boost clean-energy vehicles in the country and leaping onto the bandwagon. The Chinese government is considering channeling funds as much as US$16 million to build EV charging stations across the country, which would be a tailwind for carmakers like Tesla, BYD and Kandi, who have been trying to cope with the concerns of the Chinese consumer regarding convenience and reliability.

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