What really drives the Foxconn Stellantis joint venture

What really drives the Foxconn Stellantis joint venture

Business news |
By Christoph Hammerschmidt

The creation of Mobile Drive underlines the importance that software will have for future generations of cars – not only at the functional level such as ADAS or automated driving, but even more so at the level of information and comfort functions, at the level of personalising cars and sharing data. In the future, this level is likely to be at least as important and strategic for the business models of vehicle manufacturers as the functional level. With choosing the cockpit electronics as the primary subject of the JV, Stellantis underlines the paramount importance of this domain for innovative digital user experiences – and for future business opportunities for the automotive industry.

With the foundation of Mobile Drive, Foxconn comes a good deal closer to its goal of becoming a major player in the automotive industry. Milestones towards this goal so far have been the manufacturing contracts with the electric carmakers Fisker and Byton and – even more important – the development of its own platform for electric cars. At the same time, Foxconn is moving up the automotive food chain – from a manufacturing service provider to developer of software for important vehicle functions. One expression of this promotion is that Foxconn does not play the role of a mere service provider, but as part of a 50:50 joint venture and thus on an equal footing with the OEM.

In the case of Stellantis, it is not quite as clear what goals the company is pursuing with the JV. The carmaker could increase the development speed of its cars, but it bears the risk of losing the advantage of competitive unique selling propositions. In this respect, Stellantis’ strategy clearly differs from that of other large OEMs such as BMW, Daimler or Volkswagen, which consider their software to be competitively relevant and want to keep it under their exclusive control.

It is quite possible that this will allow Stellantis to catch up with the first league players in the automotive industry in terms of development speed – it is even not unlikely that Stellantis will overtake them. We remember all too well the toothing problems Volkswagen had to contend with – and what became known was certainly only the tip of the iceberg. In addition, Mobile Drive’s chosen business model – the ability to market its software beyond the parent company – offers the opportunity to better spread development costs.

It is however unclear how things can then continue further. Because it is also an open question whether the VWs and Daimlers of this world will be able to turn exclusive control over their software into an economic advantage. For the time being, the top dogs still pretend to be convinced that this eventually will be the case. “We want to keep the development of an operating system under control because this is the only way we can quickly introduce competition-relevant features throughout the vehicle. Such features affect many software layers in the car,” explained a Daimler insider.

But that is only one side of the coin. With Android Automotive, Google is demonstrating that it is possible to establish software in the car industry across brands. Besides Volvo / Polestar, Ford and the PSA Group are also among those car manufacturers who can imagine taking over important software functions from third-party suppliers without immediately fearing for its differentiating features.

And there is one more important aspect: The industry has come to see cars as “smartphones on wheels”. But smartphone users are used to a much faster pace of innovation than the car industry is currently showing. Anyone who takes this slogan seriously must therefore significantly increase the pace of development. With the launch of the JV with Foxconn, Stellantis is getting closer to this milestone. The big question is whether speed is everything.

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