Lately, I’ve been thinking a lot about the developments in the automotive industry. With the rise of e-mobility, the playing field is fundamentally changing. The engine, once a massive barrier to market entry, is losing its significance. Building a car is becoming increasingly easier, opening doors for companies outside the traditional automotive sector.
Companies like Huawei, Xiaomi, and Sony are suddenly entering the automotive market. They’re leveraging their expertise in electronics and software to develop their own vehicles. While these firms sell their cars under their own brands, Foxconn is taking a different approach that has caught my attention.
Foxconn’s White-Label Strategy
Foxconn, known as a contract manufacturer for electronic products like the iPhone, is pursuing an interesting idea:
- Development of White-Label Cars: Foxconn develops electric vehicles that serve as “white-label products.”
- Licensing and Customization: Other companies can license these vehicles and customize them according to their preferences—be it design, software, or features.
- Production by Foxconn: Foxconn handles the actual production, which is their core competency.
The target audience for this model includes companies like Sixt, Hertz, Uber, or Didi. They could offer their own branded cars without bearing the technical risks and high development costs.
There’s already a first example: In Taiwan, Foxconn’s cars are sold under the Luxgen brand. The drivetrain technology comes from ZF’s subsidiary Chassis Modules, in which Foxconn has held a 50% stake since April. The design is by the renowned Italian studio Pininfarina. Through such partnerships, Foxconn compensates for lacking expertise and builds credibility in the industry.
Hardware Becomes Interchangeable, Software Becomes Key
These developments accelerate a trend we’ve been observing for some time: hardware is becoming increasingly interchangeable. The real differentiation lies in software. The car is evolving into the new end device, much like the smartphone or VR headset. Companies are vying to access users and bind them to their ecosystems.
The Car as the Next Major End Device
In an era where connected devices dominate our daily lives, the car could become the next major end device. It offers a platform for applications, entertainment, and personalized services. As autonomous driving technology advances, the car’s interior transforms into a living space where we can work, relax, and communicate.
Alongside the VR headset, the car is one of the most fiercely contested end devices. Tech giants like Apple and Google are heavily investing in automotive technologies. They see the potential to integrate their services and products into people’s daily lives—even on four wheels.
Will the iPhone Business Model Transfer to the Automotive Industry?
The question that arises for me is: Can the business model that has been so successful in the smartphone market be transferred to the automotive industry? Foxconn’s approach closely resembles their role in producing the iPhone. They provide the hardware platform, while other companies supply the brand, design, and software.
The Opportunities
- Brands Can Quickly Enter the Automotive Market: Companies without their own production facilities can offer their own cars without bearing the high investment costs.
- Flexibility and Adaptability: The white-label solution allows vehicles to be quickly adapted to market trends and customer desires.
- Focus on Software and Services: Companies can concentrate on developing software and services that offer real added value to the customer.
The Challenges
However, there are significant concerns:
- Complexity of the Automotive Business: The automotive industry is much more complex than the electronics sector. Safety requirements, regulatory compliance, and liability issues present high hurdles.
- Consumer Trust: Cars are a long-term investment. Customers expect quality, safety, and reliability. New brands must first earn consumers’ trust.
- Infrastructure and Service: Building a service network for maintenance and repairs is costly and time-consuming.
The Role of Software and AI
It is undeniable that software and artificial intelligence will shape the future of the automotive industry. Autonomous driving systems, connected services, and personalized user experiences will become standard. Companies that lead in these areas can secure decisive competitive advantages.
My Forecast
I believe we will witness a shift in the automotive industry’s value chain. As hardware loses significance, software moves into the spotlight. Companies with strong software competencies—whether in developing operating systems, AI, or user interfaces—will dominate.
Foxconn’s model could be successful, especially if they manage to overcome the challenges of automotive production and forge strong partnerships. Mobility service providers like Uber or Didi might indeed be interested in operating their own vehicles perfectly tailored to their services.
The Race for the Next Big End Device
The car is becoming a coveted end device through which companies can access users. Similar to smartphones, we might see closed ecosystems where hardware, software, and services seamlessly integrate. The battle for dominance in this area will be intense.
Conclusion
The automotive industry is on the brink of profound change. E-mobility, software, and AI are altering the rules of the game. While traditional manufacturers must adapt their business models, new players are entering the market.
Whether the iPhone business model will work in the automotive industry depends on many factors. Foxconn could play a key role if they can navigate the market’s complexity and create added value for their partners.
One thing is certain: the car as an end device will be a central battleground in the coming years. Companies that succeed here will sustainably shape the way we experience mobility.