Supply Chain Matters highlights a report indicating that a well know global contract manufacturer is making equity plays in a U.S. based EV pick-up truck start-up.

This week is turning out to be a theme of Foxconn Technology related developments.

The Wall Street Journal has reported (Paid subscription or metered view) that the globe’s largest contract manufacturing services provider is deepening its equity and process design investment in U.S. based electric powered pick-up truck manufacturer Lordstown Motors.

The two companies announced earlier this week that the Taiwan based CMS provider will invest $170 million to purchase common stock and newly created Lordstown Motors public and preferred shares, and that both companies will collaborate in developing their first electric vehicle together, reportedly without providing additional details.

According to this report, Lordstown indicates it plans to leverage the proceeds of this investment in adding engineering talent and funding operations, including the production of the first 500 vehicles from its Ohio based factory.

There is also some background history.

This start-up encountered a number of delays in the design and ramp-up production of its branded EV vehicles. The company managed to acquire the former General Motors Lordstown facility in 2019 in an attractive $20 million deal when the then Trump Administration and local officials pushed back on the potential closing of the facility. Lordstown then encountered a significant set of challenges in delayed design development and other matters that called into question whether design and production goals could be met.

In 2021, The Securities and Exchange Commission (SEC) accused the EV truck maker of misleading investors about the degree of vehicle pre-orders. That led to departure of the company’s founder and CEO.

In October 2021, lacking the resources to re-fit the Ohio factory, Lordstown entered into a nonbinding agreement to sell its namesake production facility to Foxconn. The deal was billed as both companies working jointly on electric vehicle programs within the massive 6.2 million square foot production and assembly plant.

Since that time, the CMS has secured an agreement with Fisker to produce its upcoming branded Pear EV SUV at the same Lordstown production facility.

An additional aspect of the October 2021 deal was a further $50 million equity investment in Lordstown Motors common stock as a specified price.

With this new development, Foxconn will have a reported $350 million equity investment in Lordstown Motors. Also included are the rights to appoint two Lordstown board of directors members.

The caveat to this latest investment is securing approval from the U.S. Federal Government’s Committee on Foreign Investment. While this approval is expected to take three to four months.

With the ever-growing trade tensions between the U.S. and China and considering  Foxconn’s other announced electric vehicle platform design development deal involving China based Geely Holding Group, from our lens, we do not sense that this review will be a normal stamp of approval.  Another recently announced deal are plans to construct and operate a $9 billion EV production facility in Saudi Arabia, facilitated by that government may add to concerns.

Financial Performance

Separately, Foxconn reported September ending quarterly performance that included a 24 percent rise in revenues and a 5 percent increase in net income. The manufacturing services provider warned that revenues for its consumer division, which includes manufacturing of smartphones, will be flat for the final quarter because of the ongoing Covid restrictions impacting its massive iPhone City complex.

Regarding longer term outlook, executives indicated a target of 5 percent market share in the electrically powered vehicle market segment by 2025, including expected growth of the Lordstown Motors production capability.

Added Perspectives  

Automotive and EV production stakeholders should keep a keen eye on these ongoing developments since Foxconn is making bold strategic plays to be a strategic player in electric vehicle platform design and high-volume production globally. The question is whether these efforts become entangled with growing geo-political trade and country specific intellectual property protections.

 

Bob Ferrari

© Copyright 2022, The Ferrari Consulting and Research Group and the Supply Chain Matters® blog. All rights reserved.