(Bloomberg) -- Hon Hai Precision Industry Co., the iPhone assembler that’s part of Foxconn Technology Group, plans to establish a joint venture with Fiat Chrysler Automobiles NV to develop and make electric vehicles in China.
Hon Hai and its subsidiaries will hold a 50% stake in the venture, and Fiat Chrysler will hold the rest, the Taiwanese company said in an exchange filing. While the two companies have yet to sign a formal agreement, they plan to target the China market first and consider exporting cars later.
The two aim to ink the agreement in the first quarter, according to a person familiar with the matter, and Hon Hai’s Hong Kong-listed unit FIT Hon Teng will also be involved. A Fiat Chrysler representative didn’t immediately comment beyond the filing.
“Hon Hai will be responsible for design, components and supply chain management,” Chairman Young Liu told Bloomberg News in a text message, adding that the company will not get into car assembly. The manufacturer expects the automotive business to account for 10% of overall sales in the long run, according to Liu, and the new venture will have little impact on Hon Hai’s earnings this year.
Hon Hai and Fiat Chrysler are focusing on the China market because of sheer volume, Liu said. While consumers in the country buy more electric vehicles than anywhere else in the world, sales have slumped since the government pared back subsidies amid a broader-market downturn in demand.
Hon Hai relies on Apple Inc (NASDAQ:AAPL). for about half of sales. Past attempts to diversify its product lines have not been entirely successful. The company tried to invest in a number of electric-vehicle ventures before, but none has borne any fruit.
