Shares in Foxtron Vehicle Technologies, the electric car unit of Taiwanese contract manufacturer Foxconn, fell in their debut on Monday, hurt by concerns over headwinds in the highly competitive electric vehicle market. EV demand has been rising rapidly, but the sector is still relatively new, and the industry’s leaders need help to scale up production quickly enough to meet surging demand.
The company’s shares recovered some ground from earlier losses of as much as 9%, ending down 2.7%, giving it a market capitalization of around $2.7 billion. But the poor start reflected the challenges that many investors see ahead for the sector, including inflation and higher interest rates, which have pushed up the cost of cars. At the same time, manufacturers struggle with pricing pressure from industry leader Tesla.
It is also still being determined whether Foxconn can build a sustainable profit from its new business as it faces tough competition and price cuts from China’s domestic EV makers, who have been ramping up production to grab market share. The Chinese EV makers have been able to cut prices and boost sales as they move into markets where regulations have yet to take effect fully and where consumers haven’t been exposed to the total costs of a car purchase.
Another complication is the uncertain political climate. Foxconn founder Terry Gou weighs up whether to launch a bid for Taiwan’s presidency, which would require him to register as a candidate in the next elections in 2024. Gou has said he will decide on his candidacy within weeks.
For now, Foxconn is trying to find a product to make at the site in Mount Pleasant, which it bought in 2018 with the promise of creating 13,000 jobs. The search has been complicated by a political fight over a tax subsidy package for the project, which has now been whittled down to about half of what was initially offered. Chairman Young Liu said in March that he would decide between making EVs or coffee robots at the plant. He has started talking with the state’s Economic Development Corporation about building a factory with Californian startup Fisker.
If that deal does end up going through, it will represent the latest attempt by a big technology firm to tap into the potential of electric vehicles in a country where it has struggled with a labor shortage. Despite the challenges, Foxconn has substantially invested in its EV manufacturing operations. The company supplies parts for various name-brand EVs, and it has a significant presence in Thailand, where the market for battery electric vehicles (BEVs) and plug-in hybrids (PHEVs) has grown significantly. In 2021, sales of electric cars doubled to 21,000 units, with most of the shipments being Chinese-made BEVs.
