After years of speculation that it will enter the automotive industry with its own vehicle, Apple is close to finalizing an agreement with Hyundai-Kia to manufacture an Apple electric vehicle at the Kia assembly plant in West Point, Georgia, according to several sources who have informed CNBC about the plan.
The so-called “Apple car”, which is being developed by an Apple team, is tentatively scheduled to go into production in 2024, although people familiar with the talks between Apple and Hyundai-Kia say the eventual launch could be rejected.
Sources say CNBC has not yet reached an agreement between the two companies. In addition, they point out that Apple may eventually decide to partner separately with another carmaker or work with Hyundai.
A source familiar with Apple’s strategy for developing a car tells CNBC: “I doubt that Hyundai is the only car manufacturer with which it could reach an agreement, there could be someone else.”
Apple shares rose more than 2% after hours in the news.
Apple and Hyundai-Kia spokesmen declined to comment when they reached CNBC.
If a deal is finalized, why would Apple choose Hyundai-Kia? Equally important, why would the Korean carmaker conclude an agreement with Apple?
Those familiar with the discussions say that each company sees a unique benefit in working with the other to develop an Apple machine.
For Apple, the decision to build a car opens up the potential to reach a global car and mobility market valued at $ 10 trillion. Morgan Stanley analyst Katie Huberty explained the profit potential for Apple in a research note she issued in January.
“Smartphones have an annual TAM of $ 500 billion. Apple has about a third of this market. The mobility market is $ 10 trillion. Therefore, Apple would only need a 2% share of this market. to be the size of their iPhone business, “Huberty wrote.
Sources familiar with Apple’s interest in working with Hyundai say the tech giant wants to build an “Apple Car” in North America with an established carmaker who wants to 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, work with Apple is led 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 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 automotive technology, including robotics.
There is no indication 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 the available capacity, so scaling production and operating the Hyundai-Kia supply chain can be done relatively quickly.
The vehicles stand outside the first Kia car factory during its grand opening in West Point, Georgia, USA, on Friday, February 26, 2010.
Dave Martin | Bloomberg | Getty Images
Although it is not yet clear what the first Apple car will look like, those familiar with the plans say that there are some notable features.
“The first Apple cars will not be designed to have a driver,” said a source familiar with the current plan. “These will be autonomous electric vehicles designed to run without a driver and focused on the last kilometer.” This could mean that Apple machines, at least initially, could focus on bundled food delivery operations and companies incorporating robotaxis.
The move could bring the tech giant into direct competition with Tesla, which is launching automatic driving features for its vehicles. Tesla CEO Elon Musk recently told investors that turning Teslas into self-driving robotics could help justify the company’s valuation, as the cars would be used several hours a day, allowing Tesla to earn more revenue per car. In 2018, Apple brought Doug Field, then senior vice president of Tesla engineering, back to Apple, where he had previously worked, probably to work on self-driving cars. Apple has also hired a host of other former Tesla employees, including Michael Schwekutsch, now senior director of engineering for Apple’s Special Projects Group and former Tesla vice president of engineering.