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Apple in Talks with Hyundai to Produce iCar
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The South Korean auto manufacturer stated that it is in the early stage of talks with Apple regarding an electric car and battery tie-up. At the same time, Apple has declined to make any comments on the matter. Hyundai adds up more than eight billion USD in its valuation as its stocks jumped amid the reports. Judging by it, we can say that the interest in the venture is pretty high; however, the expectations around iCar may not appear until 2028.

Transportation electrification is one of the major trends in this century, and the markets worldwide are reacting to it. Over 700% year-to-date surge in China-based electric car maker’s NIO’s share value (1) and Tesla’s 1200% growth (2) indicates that investors are excited about electric vehicles. 

From 2017 to 2018, EV sales worldwide observe a dramatic sales surge of 65% for a total of 2.1 million vehicles (3). Notably, the sales figure had remained steady through 2019. However, the subsequent coronavirus outbreak resulted in a 25% decline in the EV purchases during the first quarter of last year (4). 

Regardless of these setbacks, EV demand would again rise according to BNEF, Bloomberg New Energy Finance (5), which has observed improved batteries, more readily available infrastructure for charging, price parity with ICE internal combustion engine vehicles as its major drivers. 

According to the study, EVs would hit 10% of worldwide passenger vehicle sales by 2025, surging to 28% in 2030 and 58% by 2040. 

It is worth highlighting that China accounts for the largest share of EV sales globally and plans to expand further to reduce energy imports, address its poor urban air quality and attract investors into its domestic auto industry. In September last year, the demand for EVs in China had reached 125,000 units, a starling mid-pandemic jump of 99.6% from 2019.

Notably, Tesla is the first overseas carmaker who received permission to open a factory in China without any Chinese majority partner. And after opening its giga-factory in Shanghai, the company became the largest seller of EVs in China, cutting prices several times to qualify for local government subsidies. Tesla also outperformed Wall Street expectations by scooping Q3 earnings of 8.77 billion USD.

NIO, a luxury electric car maker, a subsidiary of JAC Motors, the communist state-owned corporation. It is widely viewed as a potential Tesla challenger in the country. Its stock has recently soared over 1000% of its March 2020 value, and it is now hovering at about 28 USD per share.

NIO and other China-based manufacturers benefit from government subsidies with pledges of financial support through next year. Such measures, with a 1.4 billion USD government investment in charging infrastructure, depict a robust commitment.

Regardless of these points, the world is still skeptical of NIO’s success and long-term value citing concerns regarding the integrity of published figures and Chinese transparency. 

Europe has also witnessed considerable growth in the EV industry. The overall sale in 2019 soared by 44%, with double-digit percentage increases in most European nations. 

At least half of the continent-wide market growth can be credited to the surging demand in Germany and the Netherlands, followed closely by Norway and France. 

In the remaining countries, purchase subsidies, improved battery tech are also increasing the EVs appeal. Another factor contributing to an additional increase in sales is the introduction of a new EU emission standard; no more than 95g of CO2/km for passenger cars by 2021 (6). 

In 2019, France also set a carbon-neutral target year of 2050, with the United Kingdom following suit. Moreover, Emmanuel Macron announced an 8.8 billion USD aid package for the nation’s automobile industry in May 2020, providing the most generous buying incentives of 13,150 USD compared to any other country. 

With Elon Musk-led Tesla disrupting its Berlin giga-factory, it is clear that the European EV industry is on the rise. 

According to BNEF (7), by 2040, EV sales will surge to nearly 60% of the global auto market compared to 2010, when annual sales were almost zero. 

With consumer consciousness on the rise and market forces gaining momentum, EVs are quickly turning themselves into the automobile industry’s future and a favorite among investors who understand its growth potential. 

It is one reason why the South Korean automaker, Hyundai, observed a stock soars recently amid the reported news of its potential partnership with Apple car. 

Hyundai and Apple: A Possible EV Partnership

According to Reuters’ report, Hyundai Motor’s share prices march upwards by approximately 25% (8). 

As per the report, Hyundai Motor Co had stated that it is in early talks with Apple over an electric car and battery tie-up. 

Notably, the report comes weeks after Reuters reported that Apple is moving forward with its self-driving technology and aims to produce a passenger EV that could include disrupting battery technology as soon as 2024. 

Earlier this week, Korea Economic Daily TV stated that iPhone maker and Hyundai are in talks to develop self-driving EVs by 2027 and develop batteries at the United States factories operated by either Hyundai or Kia Motor Corps., its affiliate. However, the broadcaster didn’t cite any sources for its report. 

While commenting on the development, Hyundai stated that it is in discussion with Apple, but it is still early, and nothing has been decided so far. It didn’t mention the topic of their discussion and refused to talk further on its earlier statement about Apple being in talks with other global automakers along with Hyundai. 

However, in a later issued regulatory filing, Hyundai did not mention Apple and stated that it is getting requests for the corporation in collaboration to develop autonomous EVs from several companies and did not identify any of them. 

Apple refused to comment. 

Regardless, Hyundai’s statement revision suggests that it is more cautious concerning future communications on any potential partnership with Apple, which is known to keep product plans under tight wraps. 

There is no denying that an iCar could be a significant challenge for EV market leader Tesla Inc. It also remains unclear with whom the iPhone maker would collaborate for its car assembly. But analysts suggest that the company would rely on a manufacturing partner to build their cars.

“We continue to strongly believe Apple ultimately announces an EV strategic partnership in 2021 that lays the groundwork to enter the burgeoning EV space.”

– Wedbush analysts (9). 

 

Cutting Costs

It is worth noting that Apple and Hyundai already work together on CarPlay, Apple’s software for connecting iPhones to vehicles.

According to Yun-woo, a former Designer at Hyundai and Professor at UNIST in South Korea (10), Apple outsourcing its car production to Hyundai would make sense since it is known for its quality. However, there is no surety, whether it is a good strategy for any automaker to be like Foxconn for Apple since automakers face the risks of losing control to tech companies. 

He also referred to the Taiwanese contract maker’s supply contract with the company on iPhones. Moreover, several analysts also stated that Apple might be interested in using Hyundai’s electric vehicle platform and facilities to cut costs to manufacture cars. 

“Apple could see Hyundai as an ideal partner because when it comes to legacy US automakers, they all have a strong union, which Apple would like to avoid. Moreover, their (legacy US automakers) labor cost is much higher than that of Hyundai, which often plays a big role in car production.”

– Kevin Yoo, Analyst, eBEST Investment, and Securities (11). 

 

Ultra Boost

A partnership with Apple would be a significant boost for the South Korean automaker whose global sales fell over 15% last year as the pandemic took a toll on demand. However, the recent share price increase added almost 8 billion USD to Hyundai’s market value. 

Notably, Hyundai recently increased its bets on battery-powered electric cars instead of its long time championship on rival hydrogen fuel cell cars.

The move was welcomed by its investors, considering the recent success of Tesla. 

Hyundai, which sources its batteries from SK Innovation and LG Chem, and others, is expected to launch its first EV on a dedicated electric car platform, E-GMP, early in 2021. 

Previously in 2019, Hyundai and Aptiv, an auto parts supplier, launched a 4 billion USD venture to create self-driving technologies named Motional. In the previous month, Lyft, the ride-hailing firm, and Motional announced in a joint statement that they would launch a multi-city US Robo-taxi service in 2023 (12). 

According to analysts, it is also worth noting that Hyundai does not have dedicated electric car factories in the US, and it may have to get consent from its powerful union in South Korea to seek to build EVs overseas. 

Nevertheless, with the report of Hyundai’s potential partnership with Apple, Hyundai Motor observed a 24.8% jump in its shares, hitting an over seven-year high of 255,000 before closing up at 19%. Auto parts maker Hyundai Mobis Co. Ltd also ended the session 18% higher while Kia stock surged 8.4%.

Moreover, other battery makers are also gaining ground, with SK Innovation closing up with a 7.6% jump, and the broader KOSPI market closed up at 3.97% after jumping as much as 4.3% during the session. 

 

A Walk Back

The jump of Hyundai in Seoul was the biggest since 1988. Initially, the Korea Economic Daily report stated that Hyundai has completed its internal talks on the project and awaiting the chairman’s approval.

Following the report, Hyundai stated that it is one of the several automakers that Apple had contacted. The company again revised the statement in less than 30 minutes, removing the reference to other automakers. And after a few hours, it issued another revision that completely excluded Apple.  

Hyundai had revised its announcement regarding its statement, confirming it is in talks with Apple twice within hours. 

The latest version stated that the company has been receiving requests for potential partnerships from several companies to develop autonomous electric vehicles. Hyundai added that it had not made any decisions so far since discussions are still at a nascent stage. 

There is no doubt that Hyundai risks the rage of the US-based tech giant known for its secretiveness when it comes to new partnerships and products by naming it initially.  

It is a well-known fact that the Cupertino, California-based tech giant is notoriously secretive with employees and suppliers. In 2018, the iPhone maker warned its workers to stop leaking internal information regarding plans and raised the specter of potential legal actions and criminal charges (13). In the previous year, in its internal memo, it had also stated that the company had caught 29 leakers. 

Moreover, in 2019, Tim Cook, the Chief Executive Officer, had pledged to double down on keeping Apple’s work under tight wraps. 

According to people with knowledge on the matter (14), since the development work is still at a nascent stage, the iPhone maker would take at least half a decade to launch an autonomous EV, suggesting that Apple is in no hurry for potential automaker partners. 

 

The Need for a Partner

An iCar would rival electric vehicles of Tesla and offerings from companies like upstart Lucide Motors and other established manufacturers such as Volkswagen and Daimler. However, it is worth highlighting that setting up a car plant could cost billions of dollars and would also take years. That could be the major reason why Apple is talking to potential automaker partners. 

“Apple needs to partner with a carmaker because it doesn’t have production capabilities and sales networks to sell its cars. Building up those capabilities can’t be done quickly; hence Apple will need a partner for that.”

– Lee Han-Joon, Analyst, KTB Investment, and Securities (15).  

Moreover, bending metal is also a lower-margin business than offering software, chips, and sensors that future cars would rely on. The iPhone maker has continued to investigate constructing its self-driving car system for a third-party car partner rather than its vehicle. According to people aware of the matter, the company could also abandon its car efforts altogether in the light of this approach. 

Other tech companies seeking to expand into the autonomous driving space have also sought collaborations. For instance, Waymo, Alphabet Inc’s self-driving unit, has worked with Chrysler while Amazon has tapped Rivian Automotive for cooperation over delivery vans.

 

Big Visions

Several more alliances combining technology and automotive firms are set to emerge, especially after the COVID-19 slowed down such partnerships in the past year, according to Takeshi Miyao, an analyst at a Tokyo based consultancy firm Carnorama (16).  

Hyundai would offer Apple a partner who is already accelerating a push into new technologies like electric, autonomous, and flying cars, including setting up a four billion USD autonomous driving joint venture. 

The South Korean automaker is also set to introduce its first EV this year, Ioniq 5, built on a dedicated platform. Interestingly, Hyundai, along with its Kia unit, plans to have over 23 new EV models and sell at least 1 million units by 2025.

In the upcoming year, Hyundai also plans to offer models equipped with level three autonomous driving technology. It would allow drivers to take their hands off the wheel and eyes off the road. Moreover, the South Korea-based company has also invested in Aurora Innovation, a startup formed by a driverless dream team of former chiefs of Google’s self-driving car project and Tesla’s Autopilot.  

Miyano added that Hyundai had gained a presence in EVs but faced not climbing up the ladder when it comes to the overall ranking. Hence, to step it up, it would need to tie up with other autonomous driving companies. 

 

The Confirmation

We have heard rumors about the iCar in recent weeks, and with the talk reports with Hyundai, it seems like Apple is indeed in talks with several auto manufacturers to build its first electric car. 

A report from the Korean website Hankyung, Hyundai (17), confirmed that it is in an early discussion with Apple about building its new car. The website’s original report claimed that Apple has been negotiating with the automaker to manufacture the long-rumored Apple Car. 

It also seems like Hyundai is happy to help Apple build both its electric car and develop the special batteries to power the Apple Car. According to the Korean website, a part of the development of Apple Car components would occur at Hyundai’s US facilities. It also corroborates that Apple Car is still five to seven years away and claims that the car would be introduced in 2027, as Bloomberg (18) reported previously. 

It is not the first time that rumors suggest that Apple will rely on partners to build its electric car, as the iPhone maker doesn’t have the facilities to build a car. 

Even though there is no clarity when Apple would unveil the iCar, it seems like the company is still working on it and has a consistent plan to introduce it before the end of the decade (19). 

 

Take Away

Ultimately, the journey ahead for EV companies is all up to stakeholders in the industry to consider how they can best serve their prioritized segments. 

Most automakers are certain about the shift towards emerging mobility options like electric and autonomous; such strategic partnerships can ensure their leap forward while also maintaining a competitive advantage in these hard times. 

EVs and autonomous driving technology require billions of dollars in investment. With the industry facing a severe financial crunch, the need for alliances and partnerships, such as reported between Hyundai and Apple, has become more relevant and urgent. 

While the COVID-19 pandemic has delayed immediate investment in the new mobility, market drivers would continue to encourage investment in the long-term. 

According to Counterpoint research (20), EVs would weather the pandemic storm better than traditional vehicles because of the governments’ commitment to meet their overall emission targets. In the long-term, the pandemic’s impact on EVs would be minimal, and government incentives and regulations would drive its sales. 

Nevertheless, the entire automotive industry is transitioning towards e-mobility, along with changed consumer behavior. 

The USA and China are presently leading countries in the global EV market. Tesla has emerged as the top performer, and it is further looking for worldwide expansion to raise its market share in the global EV market. However, if Apple enters the EV segment with its iCar, it will give Tesla a hard time. 

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Rucha Joshi is fueled by her passion for creative writing. She is eager to turn information into action. With her hunger for knowledge, she considers herself a forever student. She's currently working as a content writer and is always interested in a challenge.

Disclaimer: The views, thoughts, and opinions expressed in the article have been curated for our audience and does not warrant a 100% accuracy. All the information mentioned in the article is subject to change according to the changing viewpoints. Feel free to reach us at [email protected] for any change or copyright issues.

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Rucha Joshi
Rucha Joshi
Rucha Joshi is fueled by her passion for creative writing. She is eager to turn information into action. With her hunger for knowledge, she considers herself a forever student. She's currently working as a content writer and is always interested in a challenge.

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