Apple’s bid to delve into vehicle manufacturing has got a boost with a potential partnership with Hyundai Motor. The South Korean automaker said it is in early discussion with Apple to team up and build electric vehicles.
Korea Economic Daily reported that Apple suggested the team-up and Hyundai is reviewing the terms. According to the report, the proposal involves vehicle as well as battery production, and the cars are expected to be released in 2027.
Apple declined to comment on the matter and Hyundai said discussion is at early stage.
“We understand that Apple is in discussion with a variety of global automakers, including Hyundai Motor. As the discussion is at its early stage, nothing has been decided,” the company’s representative told CNBC.
The news pushed Hyundai’s shares up in South Korea.
Hyundai Motor rose 19.42%, Hyundai Wia added 21.33%, Hyundai Mobis gained 18.06% and Hyundai Glovis went up 0.75%. The company’s subsidiary, Kia, which is the second-largest automaker in South Korea also recorded 8.41% surge.
Apple’s bid to join Google and Tesla in electric and self-driving car production has been under speculation for years, as the smartphone maker was not open about it.
“Over the last six years we have seen many twists and turns in Apple’s automotive ambitions,” analysts from Wedbush Securities, said in a note.
“Project Titan as its been known within the halls of Cupertino has ultimately been significantly scaled down from its initial ramp a few years ago and now appears to be front and center again on the radar screen of the Street,” they said.
The sudden surge in interest of tech companies getting involved in car manufacturing projects a competitive future for the automobile industry, where traditional carmakers will have to fight to keep their market share. But it comes with uncertainties for the newcomers; years of hard work and no promise of success. Some analysts say the reality of making an Apple-branded car could potentially mean heavy investments for low margins.
Reuter reported earlier that Apple’s automotive program, known as Project Titan, which has been in the pipeline since 2014, with the iPhone maker targeting 2024 to produce passenger electric vehicles with a breakthrough battery technology, has stumbled on a couple of bumps.
At a point, Apple had to stop and reassess its goals. CNBC noted in a report that Apple veteran Doug Field, who worked for Tesla had to return in 2018 to oversee the project, laying off 190 people from the team.
There were questions then about who Apple would likely partner with to assemble the vehicles.
While challenges and speculations trail the project, there was hope that Apple’s involvement in electric vehicle production will cause disruption that many consumers have been waiting for.
“Apple’s design means that more active material can be packed inside the battery, giving the car a potentially longer range. Apple is also examining a chemistry for the battery called LFP, or lithium iron phosphate, which is inherently less likely to overheat and is thus safer than other types of lithium-ion batteries,” a person familiar with the project said.
With Cupertino’s financial muscle, the challenges were sure to be met. But the question of time remains. It took Elon Musk 17 years of struggle to turn the fate of Tesla into a sustained fortune-making company, which means, the computer and mobile device making company may take longer.
Prominent Apple analyst Ming-Chi Kuo said that the market was too bullish on the Apple car, adding that he wouldn’t be surprised if the vehicle doesn’t launch until 2028 or later.
But with the news of Hyundai’s partnership, the path to Apple’s electric vehicle has become clearer. Apple had previously engaged Magna in talks about car manufacturing, but the talk did not materialize as Apple was not sure of anything then.
The person familiar with the project said automotive contract manufacturers often demand volumes that could pose a challenge in order to make profit. And newcomers like Apple are not exempted.
While Apple undoubtedly has the financial power to pull off the project, other challenges still stand in the way. Ives and Backe said they would give Apple’s chance of launching its standalone car 35%-40% due to the “Herculean-like auto production capabilities, battery technology ramp, financial model implications, and regulatory hurdles involved in such a game changing initiative.”
The WedBush analysts said the project is expected to take longer given the circumspection tradition of Apple, but that partnerships are likely the first step.
“In addition, on the autonomous front and given safety/regulatory issues we would see a longer timeframe if Apple ultimately heads down this path especially given the cautious DNA of Cook & Co. in launching new products,” they said.