Hon Hai's Hong Kong-listed unit FIT Hon Teng will also be involved.
Shares of Hon Hai were up as much as 2.7% in Taipei trading Friday, their biggest intraday rise since mid-November and the main driver behind the benchmark Taiex's gain. The manufacturer expects the automotive business to account for 10% of overall sales in the long run, according to Liu, and the new venture will have little impact on Hon Hai's earnings this year.
China expert and chief executive officer of consultant ZoZo Go says that while Hon Hai has limited experience in the automotive field, it can be of great help to FCA.
Even though China's economy is not growing as fast as it once was, the market for electric vehicles grew by 6 percent in 2019 while overall auto sales contracted by 8 percent.
Hon Hai relies on Apple for about half of sales.
Tesla Inc. CEO Elon Musk told shareholders in 2014 that Foxconn was supplying some components to the electric-vehicle maker. Past attempts to diversify its product lines have not been entirely successful.
The companies said they plan to initially focus on the Chinese market, drawing on their expertise in automobile design, engineering and manufacturing and mobile software technology.
Companies like General Motors Co. and Toyota Motor Co. have entered into electric vehicle joint ventures with Chinese partners to leverage their experience in manufacturing low-priced vehicles.
The companies are in the process signing a preliminary agreement which will govern further discussions aimed at reaching final binding agreements in the next few months.
The Chinese government has a credit-based system that encourages automakers to sell electric vehicles, which leads to the spread of brands.