The company will initially focus on manufacturing electric vehicles for China.
Each company will own a 50% stake in the joint venture, Hon Hai said in a statement. Previously, the contract smartphone manufacturer has invested in ventures dealing with electric vehicles, but this will be the first as the company will actually develop and manufacture its own products.
FCA confirmed on Friday it was in talks with Hon Hai on the potential creation of a 50-50 joint venture to develop new generation battery electric vehicles and engage in the IoV, or "Internet of Vehicles", business, with an initial focus on the Chinese market.
The aim is to reach a binding agreement in the next few months, though there's no guarantee of that time-frame, it added.
"There is however no assurance that final binding agreements will be reached or will be reached in that timeframe".
Mercedes Benz of Daimler AG has joint ventures for electric vehicles with BYD Auto, one of the world's largest manufacturers of battery-powered vehicles, and its competitor Geely Holding, best known overseas as the owner of Swedish Volvo Cars.
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.
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. And Foxconn is also an investor in XPeng Motors, the Chinese electric vehicle startup that recently raised a new $ 400 million injection of capital and has assumed Xiaomi as a strategic investor.
Foxconn also has invested in Chinese battery giant CATL and a variety of other mostly Chinese transportation tech start-ups.
The Chinese government has a credit-based system that encourages automaker to sell electric vehicles, leading to a proliferation of brands.