Foxconn, Magna and REE Automotive have launched platforms for electric vehicles, offering economies of scale to lower duplicated cost for established OEMs as well as support EV start-ups that lack the capital to raise production capacity themselves.
Foxconn is well known for the contract manufacture of the Apple iPhone, which is supported by a vertically integrated supply chain. In November 2020, it formed the Foxtron subsidiary to enter the electric vehicle sector and has developed the MIH EV Open Platform, forming partnerships with over 200 automotive supplier companies to develop MIH further. Israeli start-up REE Automotive has partnered with Mahindra in its development of a modular, scalable platform. Magna International recently launched the EtelligentReach system which is designed to compete against OEM-developed plug-in hybrid powertrains and offers a reduction in emissions by 38%. Magna International’s contract manufacturing subsidiary, Magna Steyr, has assembled the Sony Vision-S concept car and has also been selected to produce the Fisker Ocean electric vehicles.
“With Foxconn already partnering with FCA and Fisker, and REE and Magna also offering routes to a common platform, the automotive industry is opening up to contract manufacturing as a route to electrification,” notes Kevin Mak, Principal Analyst in the PBCS service. “Technology companies such as Apple, Huawei, Sony and ZTE are also expanding into automotive providing another avenue for contract manufacturers.”
However Mr. Mak warns it will take time for these entrants to gain automotive experience and the trust of OEMs. “Customers will need assurances that they can retain control over the platforms’ supply, design customization and quality.”
It should also be noted that the established OEMs have been strategically planning for CASE for several years now.
“The German car industry for example is investing heavily in electrification and it is doubtful that contract manufacturing can duplicate their scale and expertise to meet the projected demand for xEVs in the next five to ten years.”, notes Hakan Gustafsson, Director at Strategy Analytics GmbH. “Contract manufacturers will also be competing against available platforms from major auto groups, such as Volkswagen with its MEB, PPE and forthcoming SSP platforms and Mercedes with its EVA and MMA platforms.”
Mr. Gustafsson concluded “Furthermore, the current problems in the supply chain only serve to highlight the importance of establishing and retaining local centers of excellence to guarantee surety of supply with scalable platforms that can support the full suite of an OEM portfolio.”