Magna-BAIC deal raises prospects for an ‘automotive Foxconn’ in China

“In China, where the future of the car is looking more and more electric, newcomers to the auto industry are looking for partners to help them build their vehicles,” Norihiko Shirouzu reports for Reuters. “Enter Canadian auto supplier Magna International which aims to spearhead a shift to contract vehicle manufacturing through its new partnership with state-owned Chinese carmaker BAIC Group.”

“According to five people familiar with the matter, their joint venture is likely to build vehicles for ride-hailing giant Didi Chuxing and possibly Chinese electric car startup Singulato Motors, in addition to BAIC’s electric unit BJEV,” Shirouzu reports. “The Magna-BAIC deal, announced in June, realizes a long-held dream of Magna Steyr, the supplier’s Austrian unit and the world’s biggest player in the still niche business of contract car assembly, to expand beyond Europe.”

“It could also portend the rise of an ‘automotive Foxconn’ for electric cars – an idea discussed by industry executives for years,” Shirouzu reports. “Given EVs’ low volumes compared to traditional models, it makes sense for some firms to outsource assembly in the same way Apple Inc and other tech companies do with Taiwan’s Foxconn.”

“Magna is well placed to take on the challenge, already producing cars for Mercedes-Benz, BMW and Jaguar in Europe, including the all-electric Jaguar I-Pace SUV,” Shirouzu reports. “‘This is exactly what some people think companies like Tesla should have done — let experienced companies like Magna do the manufacturing for them,’ said James Chao, Shanghai-based chief analyst at consultancy IHS Markit. ‘They would allow them to ramp up much more quickly, without production hiccups.'”

Read more in the full article here.

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  1. Tesla’s production problems aren’t related to its ability to manufacture, its due to Musk trying to implement a completely automated assembly line. Its the assembly line complexity that is holding Tesla back.

    But once those problems are all ironed out Tesla production volume will go up dramatically, while production costs will drop like a rock.

      1. Absolutely correct. This is why when it was muted recently that Apple might buy Tesla I wasn’t the only one saying it didn’t make sense in the way it might have back in 2013 when interest was reportedly shown but only recently revealed, and which likely inspired such reports.

        The Magna way of doing things is certainly far better suited to whatever plans Apple has for selling cars. The only logic for buying Tesla for a business is for a somewhat desperate company worried about its future relevance in the industry to take a short cut to potential massive production rates by chucking massive amounts of cash at what Tesla has already achieved while exploiting Brand awareness. That just isn’t Apples game in businesses it already knows, let alone in a competitive industry if does not, especially in production terms.

        Mind you would be the perfect way to achieve Cooks cash neutral stance though not in the manner planned.

  2. The West producing in China produces a near-Pyrrhic benefit; China invites, learns, steals, and becomes competitor, thus perhaps negating the original benefit.

    1. Yup but I guess those intent on short term benefits especially for themselves are prone to tune out the bigger picture from their thinking because I doubt that they would otherwise disregard despite the evidence, the logic of your argument. I was taking a similar stance some 20 years back to your argument but few others seemed remotely interested in it purely concerned with short term boosts to ones home economy and an electorate to please at the next election.

      Worrying thing is the Chinese set up, is effectively a National Socialist one as opposed to supposedly Communist in all but name and central control (if organised intelligently), of otherwise essentially capitalist run economies can be scarily efficient over the long term because short termism isn’t the overriding impetus. China seems to have grasped this scary historical message that isn’t equally available to a democratic system. Let’s hope Russia doesn’t ever resolve that particular equation.

    1. Diffcult isn’t it if they don’t substantially dictate matters through the important matter of dominating their sales/profits in the way they do with Foxconn (and others) it will be difficult to see how they intend to achieve the same advantages they presently enjoy with the iPhone. If not Magna I wonder who could fit into this ‘plan’, but Magna seems to be on a rather positive course of its own at present so why limit your customer base if you were running it.

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