While the two parties have yet to sign a formal agreement, they intend to put pen to paper during the first quarter of 2020.
Young Liu, Foxconn's chairman, told the financial publication Foxconn "will be responsible for design, components and supply chain management".
Hon Hai and Fiat Chrysler are focusing on the Chinese market because of sheer volume, the executive said. This seems like a very practical move from an automobile industry standpoint as China is the largest electric vehicle market in the world.
Hon Hai relies on Apple for about half of its sales.
Past attempts to diversify its product lines haven't been entirely successful.
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.
"As autos get more and more electrified and more and more digital components replace mechanical ones - especially with EVs [electric vehicles], but also just traditional vehicles - there's scope for a real opportunity here", Bloomberg Intelligence analyst Matthew Kanterman said.
While Hon Hai has limited automotive experience, it does bring other things to the table, said Michael Dunne, a China expert and CEO of consultant ZoZo Go. But these vehicles could be exported at a later date, according to Foxconn.
Fiat Chrysler and Foxconn are now engaged in the process of signing a preliminary agreement and expect to sign the final binding agreements in the next few months.
Great Wall, one of the biggest sellers of sports-utility vehicles (SUV) in China, plans to enter India with its Haval and electric vehicle brands and will announce detailed plans at the Delhi auto show in February, Liu said in the statement.
The Chinese electronics giant is in talks with Fiat Chrysler to develop and build electric cars in China.