There are at least 5 reasons for pursuing this strategy:
1/ Escaping the low-margin trap
Foxconn’s core business (ie. contract manufacturing consumer electronics) is a relentless, low-margin game. The shift into EVs is a strategic necessity. Apple’s iPhone supply chain won’t sustain growth forever, and as I often note, contract manufacturers are at the mercy of their largest customers. By entering EVs, Foxconn is diversifying into a market where manufacturing expertise still has leverage, and where the commoditization cycle hasn’t fully played out.
2/ The Tesla Playbook: Vertical integration meets mass production
Tesla disrupted the auto industry by approaching car manufacturing more like consumer electronics—software-driven, supply chain optimized, and vertically integrated. Foxconn is flipping the script. It already dominates high-scale, just-in-time electronics production. Now, by acquiring a stake in Nissan, it gains legacy automotive expertise and market credibility, which will be essential for scaling up its EV ambitions.
3/ Nissan’s desperation = Foxconn’s opportunity
Nissan, reeling from failed merger talks with Honda, is struggling for relevance in a rapidly shifting EV landscape. Foxconn needs auto industry know-how, and Nissan needs a lifeline. This partnership isn’t just about manufacturing, it’s about survival. Nissan brings distribution, regulatory expertise, and an established brand. Foxconn brings cost efficiency, supply chain mastery, and the ability to move faster than traditional automakers.
4/ Geopolitical hedge against tariffs
With looming U.S. tariffs on imports from Mexico and Canada, Foxconn is seeking ways to localize production and mitigate trade risks. Expanding into EVs, especially through a partnership with Nissan, allows it to establish production in regions that are less vulnerable to sudden policy shifts. This echoes my point that manufacturing, in a deglobalizing world, is becoming more about local hubs rather than a fully globalized supply chain.
5/ AI & software-defined vehicles: the real endgame
Foxconn’s real competitive edge isn’t in building traditional cars, it’s in leveraging its expertise in AI servers, cloud, and networking. As cars become software-defined, the winners will be legacy automakers and companies that understand chips, connectivity, and AI integration. Foxconn’s pivot mirrors Apple’s long-rumored EV ambitions: ie. own the interface, own the supply chain, and turn the vehicle into the next platform.
In conclusion, Fonxconn is playing a high-stakes game. If it executes well, it could become the “TSMC of EVs”, the dominant contract manufacturer for the next generation of vehicles. But if it underestimates the capital intensity and slow-moving nature of the auto industry, this could be a value-destructive detour. Either way, this is the boldest move Foxconn has made since it became Apple’s manufacturing backbone. LINK
