The Foxconn logo will be displayed on a Foxconn building in Taipei on January 31, 2019.
Sam Yeh | AFP | Getty Images
For a new business with little turnover, FoxconnThe burgeoning auto business got off to a good start this year, partnering to develop new electric cars with Chinese start-up Byton and Hong Kong-based automaker Geely for the production of electric vehicles. And in between came a headline related to Apple‘s long-hyped and slowly evolving EV initiative: a statement from South Korea Hyundai Motors about a Joint venture Cars in which Apple has a stake are expected to begin production in 2024, although the company later withdrew the specific mention of Apple among its potential partners – Apple’s demands for secrecy of partners are known.
Offers like these are only likely to be the beginning of a profound change that will affect the auto business over the next ten years as electric vehicles move from around 3% today to the 28% market share of Bloomberg New Energy Finance projects for 2030 and drive themselves or cars and trucks move autonomously in the direction of long-promised fruits. The new technologies open up business to new players with different core competencies than traditional executives who excel in physical manufacturing, as cars become more software-controlled until they drive themselves.
Some of these changes will be obvious to consumers, while others will be more subtle, changing the global supply chains that later deliver cars and trucks to suburban driveways. Analysts believe that some alliances will result in cars coming from companies familiar with other industries, especially technology alphabetWaymo Division and maybe Apple are supplying cars that incorporate their technology and maybe their brand names.
Big deals have been made throughout the month. January 19th General Motors announced that the company has invested or raised a new $ 2 billion in Cruise’s autonomous driving subsidiary, including funds from Honda Motor and Microsoft will also offer Cruise cloud computing services and its due hail service competing with Uber and Lyft. And Electric vehicle start-up Rivian, slated to deliver its first vehicles this summer, has raised $ 2.65 billion from investors including Amazon.com’s Climate Pledge Fund and T. Rowe Price and Fidelity Investments, mutual fund companies whose presence could indicate an upcoming IPO of Rivian of Plymouth, Michigan.
Others will feature companies like Foxconn, which is now making iPhones for Apple to help new automakers quickly master the basic software and hardware license and use it as a platform for their own innovation.
“Apple would never respond if it weren’t for both an electric vehicle and an autonomous vehicle,” said CFRA analyst Angelo Zino. “The transport is massively disrupted.”
How fast will it go and how big can the change be for some of these companies? At press time, Foxconn and Apple had not responded to a request from CNBC.com for comments on these reports.
In the case of Foxconn, the change is likely to be gradual, said Kuala Lumpur-based CFRA research analyst Hazim Bahari.
The core idea at Foxconn is intended to be to the auto industry what the Android operating system was to cell phones – A lower cost platform for basic technologies that partners can add to new vehicle development, said Bahari. Foxconn’s parent company Hon Hai announced in October that up to 200 automakers have expressed interest in partnering to use the company’s MIH platform and hope to provide components or services to 10% of the world’s electric vehicles by 2027, with autonomous driving software for batteries about manufactured components, said Foxconn’s mother Hon Hai in an analyst presentation in October.
The MIH platform includes unibody chassis platforms, suspensions, and battery pack designs that can be tailored for different automakers, says Foxconn. The company hopes to introduce solid-state batteries by 2024, which proponents say will ultimately be safer, faster to charge, and more durable than today’s technology, but have been hugely expensive so far.
The company hopes building a new market in support of automakers will help offset mature cellphone sales, but progress will be slow, Bahari said. He estimates the project will generate only about 1% of Foxconn’s revenue within three to five years, currently about $ 175 billion from all sources.
“The names I’ve heard (those Foxconn works with) are mostly less well known, especially in China,” Bahari said before the Geely deal was announced. “How quickly this all happens depends on the amount of platform technology you share. You won’t share all of the technology that you have.”
The Hyundai headline about Apple remains uncertain – Apple CEO Tim Cook said when asked about an “Apple Car” in a television interview this weekend that he will not comment on rumors – but analysts anticipate multiple alliances, possibly one with VolkswagenAccording to Wedbush analyst Dan Ives, the Cupertino giant can develop an Apple-branded EV this decade.
“I would expect it to be something like [Apple’s] Wearables business, “said Ives, referring to the growing AirPod headphones and Apple Watch business.” In the next five to seven years, electric vehicles could account for 5 to 10% of total sales. “
The usual skepticism about Apple’s entry into the auto business is that making cars has much lower profit margins than Apple is used to – General MotorsLast year’s profit was about 4.4% of sales compared to nearly 24% at Apple. But financial concerns about Apple’s auto-bet may be wrong or just out of date, analysts said.
Zino points out that EV manufacturers like Tesla They have significantly higher share prices relative to their profits than even well-run phone and service companies like Apple, whose shares are trading at 32x earnings estimates this year, versus more than 200 times for Tesla. If investors look at Apple as an EV maker, it can add value for money by an amount that the market will dictate, Zino said.
GM recently hit a record course as Wall Street and investors have more confidence in their EV investment strategy.
People look at a Tesla Model Y car in a Tesla showroom in Beijing on Jan. 5, 2021.
Wang Zhao | AFP | Getty Images
Morgan Stanley Apple expert Katy Huberty argues that Apple’s well-known pattern of vertical integration, in which the software and design of all of its products are controlled, even if actual manufacturing is typically expanded, is likely to drive profit margins in the auto business can reduce over 10%. . She says the company has already invested heavily in batteries and other components for an Apple-branded electric vehicle.
“A significant percentage of Apple’s revenue comes from products and services that didn’t exist three to five years ago,” said Morgan Stanley analyst Katy Huberty in a webcast with fellow Morgan analysts. “Smartphones cost $ 500 billion annually [market]. Apple has a third. The mobility market is valued at $ 10 trillion, so Apple only needs 2% to match the size of its iPhone business. ”
According to Brett Smith, technology director at the Center for Automotive Research in Ann Arbor, Michigan, focusing on a handful of big names facing consumers shows the changes that will see automotive manufacturing over the next decade.
CAR research shows that companies from fields as diverse as semiconductors to consulting firms, as well as existing auto giants like General Motors and Ford, are re-evaluating their collaboration in the automotive industry, following a pattern the research firm calls Industry X fordThe recently unveiled electric Mustang was hailed as the first real competitor to Tesla’s Model Y crossover, and GM made a series of announcements at the Consumer Electronics Show that electric vans should begin selling later this year floating plans for a flying taxi that would be branded Cadillac.
Fully electric Mustang Mach-E 1400 prototype from Ford Performance and RTR
However, the CAR report emphasizes how early and uncertain the transformation is. After studying almost 50 companies, according to the think tank, the industry does not yet have a unified approach to the digital transformation strategy or to coordinate information technology with the technology used in the factory.
The only industry-wide consensus is that the data generated in automobile manufacturing and gleaned from monitoring cars while they are in motion will become just as valuable as the cars themselves, Smith said. This can be done in a number of ways, such as using data to streamline supply chains and production itself, or by following Tesla’s lead in developing services based on and using data taken from individuals’ cars , he said.
“It’s too complex for one company to be the expert,” said Smith.
The pace of change is likely to be more evident in Asia than North America, as existing auto companies are less anchored outside of Japan and there is more room for startups to grow, Bahari said.
But it’s coming. Some changes will be more obvious than others, but within a few years the list of cars and automakers dominating the market may be unrecognizable. And that’s before you get to the point where car owners wonder if they should do their own driving wholly in favor of services like Lyft and Uber.