January 23, 2021
2 min read
Hyundai announces they are discussing plans to initiate a joint venture with Apple to develop self-driving electric vehicles (EV).
In a press release in early January, Hyundai revealed that it was in talks with Apple to develop self-driving EVs. Following the declaration, the South Korean carmaker attempted to quickly backtrack, probably at the behest of Apple, known for its secrecy and strict NDAs, by suggesting that they were in talks with several companies – with Apple subsequently and inconspicuously omitted from the statement.
After news emerged of the potential collaboration, Hyundai’s share price rose by more than 20%. This was the company’s largest stock jump since 1988 and resulted in an added £6.5 billion to its market cap. Reports suggest the planned release date for the car is 2027.
It is unsurprising to discover that Apple intends to break into the automotive sector. Competitors such as Google have already made headway with development on self-driving technology (Waymo). It was, however, initially rather surprising to discover that Hyundai would be the chosen partner.
Yet, there are clear benefits for both partners if this joint venture proceeds, no doubt with lots of legal advice required along the way. Despite consumer snobbishness relating to the Hyundai brand, the company has developed a formidable presence in the industry. They are the fifth biggest carmaker by sale. In 2019, they started a $4 billion joint venture with Irish-headquartered tech group Aptive. Moreover, they have set up a war chest promising to invest up to $35 billion over the next 5 years into tech-related automotive initiatives. Additionally, Hyundai offers Apple the largest integrated production facility in the world with a dual focus on EVs and hydrogen-powered vehicles. The latter is particularly appealing as it offers Apple diversity in investment.
Simultaneously, Apple provides much needed help. The tech behemoth has $200 billion in cash reserves. Under cash-strapped circumstances, this injection of cash will play a key role in facilitating projects moving forward. Indeed, since 2014 Hyundai’s operating cash flow has only covered its investments twice. Apple also brings global brand recognition which is certainly an aspect of the business that Hyundai struggles with. Other benefits include a wide and integrated platform as well as key technical and innovative expertise.
It must be noted that there are key barriers that may make the joint venture difficult. Firstly, the automotive sector has slight profit margins and is already highly crowded. Secondly, there are significant regulatory issues relating to Apple entering the sector on which lawyers will advise. Other issues include liabilities, insurance, specific government policies and social costs, all of which will require legal advice.
Report written by Andri Boda
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