Apple and Hyundai-Kia are pushing for an agreement with Apple Car

After years of speculation that it will eventually work with its own vehicle in the automotive industry, Apple is close to concluding an agreement with Hyundai-Kia to manufacture an autonomous electric vehicle of Apple brand according to the Kia plant in West Point, Georgia, according to several sources who informed CNBC about the plan.

The so-called ‘Apple Car’, which is being developed by a team at Apple, is tentatively scheduled to go into production in 2024, although people familiar with the talks between Apple and Hyundai-Kia say that the eventual implementation may be pushed back word.

According to sources, no agreement has yet been reached between the two companies. In addition, they emphasize that Apple may eventually decide to partner with another automaker separately or to partner with Hyundai.

One source familiar with Apple’s car development strategy tells CNBC: “I doubt Hyundai is the only carmaker with which they can enter into an agreement, and that there could be someone else.”

Apple shares rose more than 2% after hours.

Spokesmen for both Apple and Hyundai-Kia declined to comment when CNBC reached out.

If a deal is finalized, why would Apple choose Hyundai-Kia? Equally important, why would the Korean carmaker enter into an agreement with Apple?

Those familiar with the discussions say that each company sees a unique benefit in collaborating with the others to develop an Apple car.

For Apple, the decision to build a car offers the potential to exploit a global car and mobility market worth $ 10 billion. Morgan Stanley analyst Katie Huberty explained the profit potential for Apple in a research note she issued in January.

“Smartphones are an annual TAM of $ 500 billion. Apple has about a third of this market. The mobility market is $ 10 billion. So Apple will only need a 2% share of this market to size their iPhone. to be enterprise, “Huberty wrote. .

Sources familiar with Apple’s interest in working with Hyundai say the technology giant wants to build the “Apple Car” in North America with an established automaker willing to allow Apple to control the software and hardware that in the vehicle will use.

In other words, it will be an “Apple Car”, not a Kia model with Apple software.

For Hyundai-Kia, the collaboration with Apple is driven by the company’s new chairman, Euisun Chung, who took control of the Korean carmaker last October. According to one source familiar with Hyundai-Kia strategy, “Chung has made it clear that mobility is the future of the company.” This is important because the Apple Car will be completely autonomous.

By working with Apple, Hyundai-Kia leaders believe they will accelerate the development of their own autonomous and electrical and vehicle plans. Hyundai is currently working with Aptiv in a joint venture that develops autonomous vehicle technology, including robots.

There is no indication that the joint venture would change if Hyundai reached an agreement with Apple. In addition, the Kia plant has available capacity approximately 90 minutes southwest of Atlanta, Georgia, so production and tapping of the Hyundai-Kia supply chain can be done relatively quickly.

Vehicles sit outside the first US Kia manufacturing facility during its grand opening in West Point, Georgia, USA, on Friday, February 26, 2010.

Dave Martin | Bloomberg | Getty Images

While it is still unclear exactly what the first Apple Car will look like, those familiar with the plans say there are some notable features.

“The first Apple Cars were not designed to have a driver,” said one source with knowledge of the current plan. “It will be autonomous, electric vehicles designed to operate without a driver and aimed at the last mile.” That could mean Apple cars, at least initially, could focus on food delivery operations and businesses that include robot tax.

The move could put the technology giant in direct competition with Tesla, which is introducing self-driving features for its vehicles. Tesla CEO Elon Musk recently told investors that converting Teslas into a self-driving robot action could help justify the company’s valuation, as the cars use longer hours a day, enabling Tesla to to earn income by car. In 2018, Apple Doug Field, then Tesla’s senior VP of engineering, lured back to Apple where he had previously worked, presumably to work on self-driving cars. Apple has also hired numerous other former Tesla employees, including Michael Schwekutsch, now senior director of engineering for the special project group at Apple and former Tesla vice president of engineering.

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