After years of speculation that it will finally enter the car business with its own vehicle, Apple is about to finalize an agreement with Hyundai-Kia to manufacture an Apple-branded electric electric vehicle at the assembly plant from Kia in West Point, Georgia, according to several sources who told CNBC about the plan.
The so-called “Apple Car,” which is being developed by an Apple team, is scheduled to go into production provisionally in 2024, though people familiar with the talks between Apple and Hyundai-Kia say the latest release could move back.
Sources told CNBC that no agreement has yet been reached between the two companies. In addition, they stress that Apple may eventually decide to partner with another automaker separately or in addition to working with Hyundai.
A source familiar with Apple’s strategy for developing a car told CNBC: “I doubt Hyundai is the only carmaker with which it could reach an agreement, there could be someone else.”
Shares of Apple rose more than 2% after hours on the news.
Apple and Hyundai-Kia spokesmen declined to comment when it reached CNBC.
If an agreement is reached, why does Apple choose Hyundai-Kia? Equally important, why would the Korean carmaker agree to an agreement with Apple?
Those familiar with the discussions say each company sees a unique advantage in working with the other to develop an Apple car.
For Apple, the decision to build a car opens up the potential to take advantage of a $ 10 trillion global car and mobility market. Morgan Stanley analyst Katie Huberty explained Apple’s profit potential in a research note she issued in January.
“Smartphones have an annual TAM of $ 500 billion. Apple has about a third of that market. The mobility market is $ 10 trillion. So Apple would only need a 2% share of ‘this market to have the size of your iPhone business,’ Huberty wrote.
Sources familiar with Apple’s interest in working with Hyundai say that the technology giant wants to build the “Apple Car” in North America with a well-established carmaker willing to allow Apple to control the software and hardware that will enter the vehicle.
In other words, it will be an “Apple Car,” not a Kia model with Apple software.
For Hyundai-Kia, work with Apple is being driven by the company’s new president, Euisun Chung, who took control of the Korean carmaker last October. According to a source familiar with the Hyundai-Kia strategy, “Chung has made it clear that mobility is the future of the company.” 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 are no indications that the joint venture would change if Hyundai reached an agreement with Apple. In addition, the Kia plant, about 90 minutes southwest of Atlanta, Georgia, has available capacity, so the production scale and leverage of the Hyundai-Kia supply chain can be made. relatively quickly.
The vehicles are located outside the first Kia car manufacturing plant in the US during its grand opening in West Point, Georgia, USA 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 a couple of notable features.
“The first Apple Cars will not be designed to have a driver,” said a source familiar with the current plan. “They will be autonomous electric vehicles designed to run without a driver and focused on the last mile.” This could mean that Apple cars, at least initially, could focus on parcel operations and companies incorporating robotaxis.
The move could make the tech giant compete directly with Tesla, which develops auto-driving features for its vehicles. Tesla CEO Elon Musk recently told investors that turning Teslas into autonomous robotaxis could help justify the company’s valuation, as cars would be in use for more hours a day, allowing Tesla to earn more revenue. raised by car. In 2018, Apple lured Doug Field, then Tesla’s senior vice president of engineering, to Apple, where he had previously worked, presumably to work in cars driving cars. Apple has also hired a myriad of other former Tesla employees, including Michael Schwekutsch, now Senior Director of Engineering for Apple’s Special Projects Group and formerly Vice President of Engineering at Tesla.
Musk said he once tried to start talks with Apple about acquiring his electric vehicle company, but Apple CEO Tim Cook declined his invitation to meet.