After years of speculation that it will finally get into the automotive business with its own vehicle, Apple is close to concluding a contract with Hyundai-Kia to make an Apple-branded autonomous electric vehicle at Kia collection center in West Point, Georgia according to a multiple source that informed CNBC about the plan.
The nickname “Apple Car,” being developed by a team at Apple, is expected to go into production in 2024, although people familiar with the talks between Apple and Hyundai-Kia say that the final release to be pushed back.
Sources tell CNBC that an agreement has not yet been reached between the two companies. In addition, they confirm that Apple may eventually decide to partner with another separate automaker or in addition to work with Hyundai.
One source familiar with Apple’s strategy of developing a car tells CNBC, “I doubt Hyundai is the only manufacturer with whom they could make a deal, someone else could be.”
Apple shares rose nearly 3% after hours on the news.
Speakers for both Apple and Hyundai-Kia declined to comment when CNBC reached them.
If an agreement is reached, why would Apple choose Hyundai-Kia? Equally important, why would the Korean automaker strike a deal with Apple?
Those familiar with the conversations say that each company sees a unique benefit in working with the other to improve the Apple car.
For Apple, the decision to build a car opens up the potential for an automated market move and a $ 10 trillion global shift. Morgan Stanley analyst Katie Huberty explained the profit potential for Apple in a research note she released in January.
“Smartphones are a $ 500bn annual TAM. Apple has about a third of this market. The mobile market is $ 10 trillion. So Apple would only need a 2% share of this market to be as big as their iPhone business, ”Huberty wrote.
Sources familiar with Apple’s interest in working with Hyundai say that the tech giant wants to build the “Apple Car” in North America by an established automaker who is willing to let Apple take control of the software and the hardware that goes into the vehicle.
In other words, this will be an “Apple Car”, not a Kia model that will contain Apple software.
For Hyundai-Kia, working with Apple is led by the company’s new chairman, Euisun Chung, who took control of the Korean automaker in October last year. According to one source familiar with Hyundai-Kia’s strategy, “Chung has made it clear, it’s the company’s future move.” That’s important because the Apple Car will be completely autonomous.
Working with Apple, Hyundai-Kia executives 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 developing autonomous vehicle technology, including robotaxis.
There is no indication that a joint venture would change if Hyundai reaches an agreement with Apple. In addition, the Kia plant has the capacity of about 90 minutes southwest of Atlanta, Georgia, so scaling production and tapping on the Hyundai-Kia supply chain can be done relatively quickly.
Vehicles will be parked outside Kia ‘s first U.S. automobile manufacturing facility during its grand opening in West Point, Georgia, USA, on Friday, February 26, 2010.
David Martin | Bloomberg | Getty Images
While it’s not yet clear what the first Apple Car will look like, those familiar with the plans say it has one or two notable features.
“The first Apple Cars will not be designed to have a driver,” said one source familiar with the current plan. “These will be autonomous, electric vehicles designed to operate without a driver and aim for the last mile.” That could mean Apple cars could, at least initially , focusing on packaged food delivery activity and companies incorporating robotaxis.
The move could bring the tech giant into direct competition with Tesla, which is rolling out self-driving features for its vehicles. Tesla CEO Elon Musk recently told investors that Teslas’ switch to self-driving robotaxis could help justify the company’s valuation, as the cars would be used for more hours each day, allowing Tesla earn higher revenue per car. In 2018, Apple lured Doug Field, then Tesla’s senior engineering VP, back to Apple where he previously worked, apparently working on self-driving cars.