Saudi Sovereign Fund, Foxconn in talks to form electric vehicle joint venture

Saudi Arabia and Taiwan’s Foxconn Technology Group are in talks to form a joint venture to make electric vehicles, a move that could help accelerate plans for the oil-dependent kingdom to diversify its economy, according to people familiar with the matter.

The Saudi Arabian Public Investment Fund, which manages about $450 billion of assets, will create a new entity named Velocity, which will be the majority stakeholder of the joint venture, said two of the people who asked not to be named because the effort is not yet public. One person said that Foxconn will be a minority stakeholder in the collaboration and will provide software, electronics and electrical architecture for the new EVs. Another person said the arrangement will help the country gain experience in manufacturing cars.

The joint venture is looking to assemble EVs on a chassis licensed from BMW AG, two people said. One of the people said that the parties aim to sign a deal by the end of the year, although no final decisions have been made and the plans could still change.

Saudi Arabia has been attempting to develop a domestic carmaking industry as part of its attempt to get rid of the reliance on oil sales. Those efforts have mostly failed. The kingdom is trying a different tactic, with the PIF leading investments into the industry. In 2018 it took a majority stake in EV startup Lucid Motors Inc. to encourage the firm to develop a manufacturing site in the kingdom. Earlier this year, Saudi Arabia hired advisers, including Boston Consulting Group, to establish its own domestic electric carmaker, Bloomberg News reported.

Some people said that the sovereign wealth fund is looking to develop a battery manufacturing plant with a target of 15 GWh of storage capacity per year by the year 2028. That project would be designed to provide batteries for Lucid and other EV makers that establish a presence in the kingdom. The Saudi government is in talks with several automakers to set up manufacturing facilities at a site on the country’s west coast, Industry and Mineral Resources Minister Bandar Alkhorayef told Bloomberg in October.

Foxconn, a key Apple Inc. assembly partner, saw rising interest in the category as a potential growth driver, and has been branching out into EV development and production over the past year. In its most notable EV move to date, the Taiwanese company agreed in October to acquire Lordstown Motors Corp.’s pickup manufacturing facility in Ohio as part of a $280 million deal. The iPhone assembler unveiled its first electric cars two weeks later, boosting its credentials as a serious candidate for Apple’s secretive automotive project.

Young Liu, chairman of Foxconn’s flagship unit Hon Hai Precision Industry Co., said in November that the company is planning to launch an EV project in the Middle East focused on software for passenger cars.

BMW has previously licensed older versions of its vehicle platforms to automakers. Vietnam s VinFast has produced an SUV using a platform developed by BMW for a previous version of its popular X 5 SUV.