After years of speculation that it will eventually enter the auto industry with its own car, Apple is nearing a deal with Hyundai-Kia to produce an Apple-branded autonomous electric vehicle at the Kia assembly plant in West Point, Georgia, according to multiple sources who notified CNBC of the plan.
The so-called “Apple Car”, being developed by a team at Apple, will provisionally go into production in 2024, although people familiar with the talks between Apple and Hyundai-Kia say the eventual rollout could be delayed.
Sources tell CNBC that no agreement has yet been reached between the two companies. In addition, they emphasize that Apple may ultimately decide to partner with another automaker separately or alongside Hyundai.
A source familiar with Apple’s car development strategy tells CNBC, “I doubt Hyundai is the only automaker they can deal with, there could be someone else.”
Apple shares were up more than 2% after hours on the news.
Spokesmen for both Apple and Hyundai-Kia declined to comment when reached by CNBC.
Why would Apple choose Hyundai-Kia when it comes to an agreement? Equally important, why would the Korean automaker sign a deal with Apple?
Those familiar with the discussions say each company sees a unique advantage in partnering with each other to develop an Apple car.
For Apple, the decision to build a car opens up the opportunity to tap into a global auto and mobility market worth $ 10 trillion. Morgan Stanley analyst Katie Huberty explained the earnings potential for Apple in a research paper she published in January.
“Smartphones are a $ 500 billion annual TAM. Apple controls about a third of this market. The mobility market is $ 10 trillion. So Apple would only need a 2% share of this market to be as big as their own.” iPhone company, ”wrote Huberty. .
Sources familiar with Apple’s interest in partnering with Hyundai say the tech giant wants to build the “Apple Car” in North America with an established automaker who wants to put Apple in control of the software and hardware in the car. goes.
In other words, this will be an “Apple Car”, not a Kia model with Apple software.
For Hyundai-Kia, the partnership with Apple is being led by the company’s new chairman, Euisun Chung, who took charge of the Korean automaker last October. According to a source familiar with Hyundai-Kia’s strategy, “Chung has made it clear that mobility is the future of the company.” This is important because the Apple Car will be completely autonomous.
By partnering with Apple, Hyundai-Kia leaders believe they will accelerate the development of their own autonomous and electric and vehicle plans. Hyundai is currently working with Aptiv in a joint venture to develop autonomous vehicle technology, including robotaxis.
There is no indication that the joint venture would change if Hyundai reaches an agreement with Apple. In addition, the Kia plant, located about 90 minutes southwest of Atlanta, Georgia, has available capacity, so scale-up production and tapping into the Hyundai-Kia supply chain can be done relatively quickly.
Vehicles will be outside Kia’s first US auto plant during the grand opening in West Point, Georgia, US, on Friday, February 26, 2010.
Dave Martin | Bloomberg | Getty Images
While it’s still unclear exactly what the first Apple Car will look like, those familiar with the plans say there are some standout features.
“The first Apple Cars will not be designed to have a driver,” said a source aware of the current plan. “These will be autonomous, electric vehicles designed for driverless driving and focused on the last mile.” That could mean that Apple cars, at least initially, could focus on parcel food delivery and companies incorporating robotaxis.
The move could put the tech giant in direct competition with Tesla, which is rolling out self-driving features for its vehicles. Tesla CEO Elon Musk recently told investors that turning Tesla’s into self-driving robotic taxis could justify the company’s valuation as the cars would be in use for more hours per day, allowing Tesla to earn more revenue per car. In 2018, Apple lured Doug Field, then Tesla’s Senior VP of Engineering, back to Apple where he had previously worked, presumably to work on self-driving cars. Apple has also hired numerous other former Tesla employees, including Michael Schwekutsch, now Senior Director of Engineering for Apple’s Special Projects Group and previously Tesla Vice President of Engineering.
Musk said he once tried to talk to Apple about the acquisition of his electric car company, but Apple CEO Tim Cook declined his invitation to a meeting.