Chinese Geely and Taiwanese FoxConn form joint venture

Geely, China’s largest private-sector automaker, has taken the first step toward becoming the Foxconn of electric vehicles.

Geely and Foxconn, the Taiwanese Apple assembler, are establishing a 50-50 joint venture that will manufacture whole electric vehicles for clients as well as parts. Just like Foxconn did with iPhones, Geely will pursue an economy of scale through contract manufacturing.

Foxconn brings its expertise in procuring components and ability to produce quality digital products. Geely will provide the auto making know-how.

Geely CEO Daniel Li said in January “The current global automotive industry is undergoing profound changes. We must actively embrace change, build alliances and synergize global resources to create greater value for our end users.”

The partnership with Foxconn is part of that vision. Last year, Geely developed a platform that can be adopted across different types of electric vehicles. The platform will lead to cost savings as the operation broadens its scale.

According to Nikkei Asia, the new venture has already drawn a potential client in EV startup Faraday Future, headquartered in California. Geely plans to provide technology to Faraday, and the Chinese carmaker is considering having the joint venture provide manufacturing services as well.

Geely and Foxconn, also known as Hon Hai Precision Industry, believe that there will be a rise in “fabless” EV manufacturers that specialize in design. That would translate to a jump in demand for consignment manufacturing, much like how Apple and Sony contract out the production of hardware.

Formally named Zhejiang Geely Holding Group, the automaker has achieved growth through external tie-ups. Geely’s affiliation with Sweden’s Volvo Cars is the most consequential in the Chinese group’s profile.

This integration can be seen at an assembly plant in Chengdu, China, where vehicles under the Swedish EV luxury brand Polestar are produced. The main building boasts sleek, futuristic architecture.
“This is the plant for the new era,” a plant executive said.

Polestar, a label acquired through its purchase of Volvo, serves as the strategic brand as Geely competes against rival Tesla.

Polestar was the first to adopt the onboard version of Google’s Android OS. The cars come equipped with voice assistants, among other features. Some models use a carbon-fiber body to reduce their weight for better fuel efficiency.

While Polestar is headquartered in Sweden, the manufacturing takes place in China. Volvo handles design and quality management while Geely brings low-cost mass production tech.

Geely bought Volvo from Ford Motor in 2010. A decade later, Volvo doubled annual global sales, to 660,000 units. Geely’s sales quadrupled, to 1.32 million units.

Geely holds Volvo’s management team in high regard, but the way the two automakers share their strengths is the secret to their success,

Geely’s ability to tap into Volvo’s strengths while respecting its management has been key, according to Alan Kang, an analyst at British research firm LMC Automotive.

Geely last year announced a merger with Volvo, only to walk back those plans last month. The automakers instead decided to strengthen their alliance while maintaining independence. Each company is better off maintaining its focus on growth and capabilities as a separate entity, Volvo CEO Hakan Samuelsson said.

Geely has pursued operational scale through deals like an investment in Malaysian automaker Proton, but groupwide sales have stalled. They were at about 2.1 million units in 2020. Toyota Motor and other top players sell far more than 9 million units within their groups.

Attaining a certain level of scale is necessary since the accumulation of data and partnerships with tech leaders will be important as the industry embraces next-generation vehicles. This reality has driven Geely to strike cross-industry partnerships, like the one with Foxconn.

On March 2, Geely established a new company with Chinese search giant Baidu, which has been developing its own autonomous driving technology. The unit, 45% owned by Geely, will embark on developing and producing electric vehicles fully operated by artificial intelligence.

In January, Geely agreed to a wide-ranging tie-up with Tencent Holdings, another major tech company, concerning the digitization of vehicles.

When Geely was founded in 1986, the company made refrigerators and other appliances. It has been making cars for a little more than two decades.

Li Shufu, Geely’s Founder and chairman.

Li Shufu, the founder and chairman of Geely, is considered close to Chinese President Xi Jinping, who once served as the Chinese Communist Party boss of Zhejiang Province, where the automaker is headquartered. It has been speculated at home and abroad that Xi’s administration has thrown its weight behind Geely.

Since China is not able to catch up with Japan and Western countries in terms of engine tech, the government seeks to take the lead in electric vehicles and other next-gen vehicles. Geely plays a prominent role in this industrial agenda.

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