[NEWS IN FOCUS] If Hyundai makes the Apple car it will gain more than just street cred
Hyundai Motor and Apple may be planning to work together on making a self-driving electric car.
Rumors of the potential partnership sent Hyundai Motor shares up by nearly 20 percent on Friday, signaling that if true, the collaboration is clearly good news to Hyundai Motor.
But aside from partnering with one of the biggest brands in the world, how exactly would the deal benefit Hyundai?
Working with Apple would actually help the Korean automaker cut down on costs and improve efficiency.
Electric vehicles (EVs) have yet to reach an economy of scale, but car manufacturers are investing huge sums of money betting on the potential.
Hyundai Motor is one of them, pledging to invest 14.9 trillion won ($13.6 billion) in its electric-powered lineup through 2025. It also launched its EV-dedicated modular platform dubbed E-GMP last year.
“Traditional carmakers which used to be focused on internal combustion engines are either not making any profit from EVs or just starting to make some money,” said Lee Sang-hyun, an analyst from IBK Securities. “Through the project on Apple’s cars, EV manufacturing volume could increase, leading to an economy of scale.”
Outsourcing an EV-dedicated platform is already an existing business model being tried out by some carmakers. Volkswagen in 2019 opened its EV-dedicated platform dubbed MEB to other manufacturers.
The potential Apple partnership could also boost Hyundai Motor’s software development capacity.
“Software in future mobility is as important as the hardware itself,” said Lee Ho-geun, an automotive professor from Daeduk University. “Partnership with Apple, whether Hyundai co-develops or purchases the system, will benefit the Korean carmaker in upgrading their own software development capacity in the long term.”
Hyundai's brand image would also get a boost from the possible partnership.
The Korean carmaker has long relied on its value-for-money cars. Only recently has it attempted to rev up the brand image to a more trendy and tech-savvy one, but the hard truth is that it still lacks acknowledgment in that area in overseas markets.
A partnership with Apple could be a big breakthrough in that sense, experts say.
“Think about the fandom Apple created with its first iPhone,” Professor Lee said. “The fact that Hyundai Motor [may be] cooperating with Apple to make the first-ever 'Apple car' will boost the brand image and increase its credibility in terms of the technology installed in future cars.”
There are also concerns.
As much as software is important for future cars, and Apple supposedly has that core technology, there are concerns that Hyundai Motor may degrade into a manufacturing subcontractor, just like Foxconn did for Apple’s iPhone.
“If the partnership ends up with Hyundai Motor acting as a manufacturing subcontractor for Apple’s cars, it would be a big minus for the Korean automaker which has just taken a leap toward high-value vehicles,” said Kim Pil-soo, automotive engineering professor at Daelim University.
In the case of Foxconn, a Taiwanese manufacturer of Apple’s iPhones, its sales surged after partnering with Apple, but its operating margin hovered around just 2 to 3 percent.
But even if Apple outsources its car to Hyundai Motor, things could go differently, as manufacturing a car isn’t as easy as it sounds.
“I believe Hyundai Motor’s case could be more similar to TSMC rather than Foxconn,” said Lim Eun-young, a researcher from Samsung Securities.
“There are only about four to five global carmakers that have their own EV platforms, and when the outsourced company owns such coveted capacity, it is likely that it will have the upper hand in the relationship, even controlling the amount of the production of its client.”
That potential is evident in Hyundai Motor shares as well as the shares of its affiliates.
Hyundai Motor shares closed at 267,000 won on Monday, recording an 8.74 percent jump from the previous trading day.
BY JIN EUN-SOO [firstname.lastname@example.org]