Hyundai confirms ‘early discussions’ with Apple over electric car and battery tie-up

South Korean car manufacturer Hyundai, through its affiliate Kia, has entered into “early discussions” with Apple, the world’s most valuable company, over an electric car and battery tie-up. Hyundai confirmed the talks at the tale end of last week, sending Hyundai’s share price up by 20% on Friday. The boost to the company’s stock market valuation has been reinforced by another near 9% gain on Monday morning, over the Asian trading session.

The Apple share price also improved over the tail end of last week, after a mild dip that bridged the last days of 2020 and first of 2021, though to a less dramatic extent.

There aren’t many partnerships with the potential to move the dial for Apple’s already enormous revenues. But a move into the EV market, and more importantly the ‘internet-of-cars’ tech ecosystems expected to move in lockstep with it over coming years, is something that could prove significant for Apple over the next couple of decades. Though profitability would be some years away and a significant investment required to reach it.

The fact that Hyundai were willing to make a public statement confirming talks suggest that there is optimism a deal can be concluded, even if discussions are still early stage. It also indicates Apple is accelerating its plans to enter the electric vehicles space. It has been reported the tech giant hopes to be selling EVs powered by its own proprietary battery technology by as soon as 2024.

South Korean media have further reported that Apple and Hyundai have the joint ambition to have self-driving electric vehicles on the road by 2027. It is believed the plan would rest on cars manufactured by Hyundai, or its affiliate Kia, powered by U.S.-built batteries, manufactured at factories also operated by either Hyundai or Kia.

The automotive industry is one of only a handful big enough to offer Apple the opportunity to significantly increase its overall revenues. That’s been recognised by the technology company for some time, and behind seven years of investment into research an development in the autonomous electric vehicles space. Apple has established its own inhouse EVs engineering and testing teams.

Saved from the brink by the release of its first iPod 2001, and propelled into the rarefied realm of the world’s biggest companies on the back of the huge success of the iPhone series that has defined smartphones, Apple is currently worth a colossal $2.2 trillion. Even Amazon, which saw its value increase by over 70% last year and continues to grow in new directions, trails Apple’s market valuation by around $600 billion.

Apple’s empire of produces includes the iPhone smartphones series, iPads, laptop and desktop computers and wearables like the Apple Watch and AirPod and Beats headphones. The company is currently focused on increasing services-based revenues and last year launched Netflix streaming rival Apple TV+.  Over the year to the end of September 2020, Apple generated revenues of $275 billion, for post-tax profits of $57 billion.

Apple’s ambitions in the electric car space could be considered a threat to the valuation of Tesla, which has recently become the world’s most valuable car manufacturer. Tesla’s revenues, profits and sales figures are relatively small in comparison to those of the biggest traditional car manufacturers, like Hyundai. But investor enthusiasm for Tesla’s perceived positioning as leading the transition to electric vehicles, has seen the company’s valuation multiple several times in the past year to around $835 billion.

With $200 billion of cash on its balance sheet, Apple certainly has the resources to trouble Tesla and the traditional carmakers with ambitions in the electric and autonomous vehicles space. Which is now essentially all of them, including Hyundai. Apple’s contribution to the partnership is expected to be the design of electric car models and the autonomous driving technology stack they will run on, as well as battery technology.

Jeong Yun-woo, a professor at Ulsan National Institute of Science and Technology in South Korea and former designer at Hyundai, comments in The Times newspaper:

“Apple outsourcing car production to Hyundai makes sense, because [the South Korean company] is known for quality.”