After years of speculation that it will eventually enter the auto business with its own vehicle, Apple is close to finalizing an agreement with Hyundai-Kia to manufacture an autonomous Apple-branded electric vehicle at the Kia assembly plant in West Point, Georgia, according to several sources who informed CNBC about the plan.
The so-called “Apple Car”, which is being developed by an Apple team, is scheduled to go into production in 2024, although people familiar with the negotiations between Apple and Hyundai-Kia say the final launch may be delayed.
Sources told CNBC that no agreement has yet been reached between the two companies. In addition, they emphasize that Apple may decide to partner with another automaker separately or in addition to working with Hyundai.
A source familiar with Apple’s car development strategy told CNBC: “I doubt that Hyundai is the only automaker with which they could close a deal, there could be someone else.”
Apple’s shares rose more than 2% after hours with the news.
Spokesmen for Apple and Hyundai-Kia declined to comment when contacted by CNBC.
If a deal is finalized, why would Apple choose Hyundai-Kia? Just as important, why would the Korean automaker make a deal with Apple?
Those familiar with the discussions say that each company sees a unique benefit in working with the other to develop an Apple car.
For Apple, the decision to build a car opens up the potential to explore a $ 10 trillion global auto and mobility market. Katie Huberty, an analyst at Morgan Stanley, explained the profit potential for Apple in a research note she issued in January.
“Smartphones represent an annual TAM of US $ 500 billion. Apple has about a third of that market. The mobility market is US $ 10 trillion. Therefore, Apple would only need a 2% share in this market to have the size of your iPhone business, “wrote Huberty.
Sources familiar with Apple’s interest in working with Hyundai say the tech giant wants to build the “Apple Car” in North America with an established automaker that will allow Apple to control the software and hardware that will enter the vehicle.
In other words, this will be an “Apple car”, not a Kia model with Apple software.
For Hyundai-Kia, working with Apple is being led by the company’s new president, Euisun Chung, who took control of the Korean automaker last October. According to a source familiar with the Hyundai-Kia strategy, “Chung made it clear that mobility is the company’s future”. This is important because the Apple Car will be fully autonomous.
Working with Apple, Hyundai-Kia leaders believe they will accelerate the development of their own autonomous and electric and vehicle plans. Hyundai is currently partnering with Aptiv in a joint venture that develops 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 about 90 minutes southwest of Atlanta, Georgia, has available capacity, so scaling production and leveraging the Hyundai-Kia supply chain can be done relatively quickly.
The vehicles are outside the first U.S. Kia car plant during its inauguration in West Point, Georgia, USA, on Friday, February 26, 2010.
Dave Martin | Bloomberg | Getty Images
While it remains unclear how exactly the first Apple Car will look, those familiar with the plans say there are some notable features.
“The first Apple Cars will not be designed to have a driver,” said a source with knowledge of the current plan. “They will be autonomous electric vehicles, designed to operate without a driver and focusing on the last mile.” This could mean that Apple cars, at least initially, could focus on packaged food delivery operations and companies that incorporate robotics.
The move could put the tech giant in direct competition with Tesla, which is launching autonomous driving capabilities for its vehicles. Tesla CEO Elon Musk recently told investors that turning Teslas into autonomous robots could help to justify the company’s valuation, as the cars would be in use for more hours a day, allowing Tesla to earn higher revenue per car. . In 2018, Apple lured Doug Field, then Tesla’s senior vice president of engineering, back to Apple, where he had previously worked, presumably to work on self-driving cars. Apple also hired a myriad of other former Tesla employees, including Michael Schwekutsch, now Senior Director of Engineering at Apple’s Special Projects Group and former Vice President of Engineering at Tesla.
Musk said he once tried to start conversations with Apple about the acquisition of his electric car company, but Apple CEO Tim Cook rejected the invitation to a meeting.