Foxconn pays $727M for half of Mitsubishi Electric’s car parts unit in EV push

Foxconn is buying half of Mitsubishi Electric Mobility, the automotive equipment business Mitsubishi Electric created in April 2024. The unit makes conventional car components as well as electric-drive and electronic systems. Before closing, Mitsubishi Electric will add its remaining automotive operations, including overseas subsidiaries, to the business being sold.

Foxconn’s investment arm, Lin Yin International Investment, signed the final agreement. The deal covers a 50% stake, while the enterprise value is ¥320 billion and the equity value is ¥230 billion. After antitrust reviews, closing is expected on October 1, 2027.

The companies will run Mitsubishi Electric Mobility as an equal joint venture. They plan to combine Mitsubishi Electric’s powertrain, software and vehicle-control technology with Foxconn’s production scale. Their stated goal is to develop Japanese EV platforms, sell them first to Japanese automakers, and later market them globally under a Made in/by Japan banner.

A Tier 1 automotive supplier is a company that sells complete components or systems directly to vehicle manufacturers. These suppliers may provide braking systems, electronics, sensors, seats, drivetrains or software. They are called Tier 1 because they sit directly in the automaker’s supply chain, even though they do not usually build the finished vehicle.

Mitsubishi Electric Mobility fits this model. Its catalog includes alternators, ignition coils, radar sensors, steering motors, battery-management units, inverters and vehicle-control systems. These parts go into vehicles made by automakers. The company also develops the technology that helps those systems work together.

An automaker builds and sells the complete car under its own brand. Foxconn is investing in the supplier rather than buying a car brand or an EV platform. Its plan is to use the supplier’s capabilities to develop platforms that Japanese automakers could eventually adopt.

Mitsubishi Electric Mobility has a broad automotive catalog. It makes charging and starting equipment, engine and transmission controls, steering components, driver-assistance systems and body electronics. Its products include alternators, starters, ignition coils, fuel-pump modules, transmission controllers, sensors, electric-power-steering motors, airbags and immobilizers.

The EV-related products are traction motors, inverters, battery-management units, EV control units and onboard chargers. It also makes millimeter-wave radar, forward cameras, ADAS control units and driver-monitoring systems. These electronic systems can support both electric and combustion-powered vehicles, so the company is not an EV-only supplier.

Mitsubishi Electric says it runs its EV and combustion-engine businesses in balance. It has large market share in rotary motors, such as alternators and starters, and in car mechatronics. The business is already exiting car multimedia and fuel injectors, while reviewing its combustion-engine operations as EV demand slows.

Mitsubishi Electric Mobility is a large but shrinking automotive supplier. It reported ¥875.6 billion in revenue and ¥54.4 billion in operating profit for the fiscal year ending in March. Its operating margin was 6.2%. Revenue fell ¥43.5 billion from the previous year, and the company expects ¥820 billion this year.

Foxconn’s transaction gives the business an enterprise value of ¥320 billion and an equity value of ¥230 billion. Compared with annual revenue, the enterprise value is only about 0.37 times sales. Compared with operating profit, it is roughly six times profit. The revenue target of more than ¥1 trillion for fiscal 2030 implies about 5% annual growth.

The valuation looks low for a supposed growth business. The equity value is below the unit’s roughly ¥352 billion in net assets. Mitsubishi Electric therefore expects to record a ¥100 billion impairment this fiscal year, suggesting it is selling a mature, low-margin division.

Foxconn’s EV strategy is about gaining technology and a platform base in Japan, not buying a pure EV manufacturer. Mitsubishi Electric Mobility has electric powertrain, software and vehicle-control capabilities that Foxconn wants to combine with its own speed and production scale. Together, they hope to create EV platforms for Japanese automakers.

The target still makes many combustion-related products. Its catalog includes alternators, starters, ignition coils, fuel-pump modules, engine-control units, turbo actuators, EGR valves and transmission controllers. It reported ¥875.6 billion in revenue, and Mitsubishi Electric says it runs its EV and combustion businesses in a balanced way.

That mixed profile is the deal’s central tension. Foxconn is using an established supplier as an anchor in Japan while adding EV capabilities around it. The partners aim for more than ¥1 trillion in revenue in the fiscal year beginning April 2030, but the article describes that as only about 5% yearly growth.

Foxconn has talked about EVs for years, but entering Japan requires more than factory capacity. Japanese automakers may value local engineering relationships, vehicle-control know-how and dependable component integration. Mitsubishi Electric Mobility already has those capabilities and an established automotive business.

Jun Seki, Foxconn’s EV chief strategy officer and a former Nissan executive, called Mitsubishi’s electronic-control technology the most attractive part of the deal. The target makes EV control units, inverters, traction motors, battery-management units and advanced driver-assistance electronics. Those systems can form important building blocks for an EV platform.

Foxconn says it wants Mitsubishi Electric to be its anchor in Japan and plans to work with other parts makers and automakers. The partners intend to develop platforms in Japan, sell them to Japanese automakers first, and then expand globally. The approach uses Mitsubishi Electric’s local technology base and Foxconn’s stated speed and scale.

The battery stores electrical energy as direct current. When the vehicle needs to move, control software reads the driver’s request and information from sensors. It then tells the inverter how much power to deliver. Sensors can monitor speed, position, temperature and other operating conditions.

The inverter converts the battery’s direct current into the changing electrical power an electric motor needs. The motor uses that power to create rotation, which reaches the wheels through the vehicle’s drivetrain. The control system adjusts the electrical supply as the driver accelerates, holds speed or releases the accelerator. Battery-management electronics monitor the battery and help control charging and use.

This coordination explains why Foxconn values Mitsubishi Electric’s electronic-control technology. The article lists traction motors, inverters, battery-management units, EV control units and sensors among its products. Combined with software, these parts can become a coordinated EV platform, although the article does not describe a specific vehicle system or design.