Why Hyundai is contemplating over partnership with Apple

Hyundai Motor Group's Electric-Global Modular Platform (E-GMP) / Courtesy of Hyundai Motor Group

By Nam Hyun-woo

Hyundai Motor gave a rare confirmation that it was in “early stage talks” with Apple over a strategic partnership under which the Korean car manufacturer may assemble the Cupertino-based iPhone designer's forthcoming electric vehicles (EVs), but questions are being raised on the feasibility of the two companies' cooperation.

This is because if the partnership actually happens, the Korean carmaker could give Apple the initiative in the EV industry and end up being a mere “contractor.”

Apple was moving forward with its “Titan projects,” calling for the company to develop self-driving EVs. Hyundai confirmed media reports on the matter, but issued a separate statement without any specific mention of Apple. Rather, it said it was in talks with “multiple companies” over self-driving EVs.

Unsurprisingly, the news heavily boosted the share prices of the company and its affiliates as a flurry of overseas media reports described Hyundai as a good match for the tentatively named iCar, but Hyundai is treating the possibility with extra caution while looking closer into the actual partnership.

Though it is unknown how the partnership will look, some analysts are saying Hyundai will be in charge of hardware and Apple will provide software ― the business model seen in Apple's arrangements with Samsung and TSMC.

Hyundai and its affiliate Kia Motors have plants in the U.S., each capable of producing 370,000 and 340,000 vehicles a year respectively. In addition to these U.S. plants, Hyundai Motor Group has manufacturing bases all around the globe, giving it a competitive advantage in terms of on-time global distribution.

The company's EV supply chain is also makes it a favorable partnership for Apple. As Apple normally asks its key suppliers to operate “Apple-only” manufacturing lines just as Samsung Display and LG Display do, it's been thought Apple may ask Hyundai to operate designated manufacturing lines assigned to manufacture only Apple vehicles strictly based on designs provided by it. Or else, the two firms could create a joint venture somewhere in the United States.

“Hyundai Motor is capable of producing nearly 7 million vehicles a year and has its own EV platform, the E-GMP. The automotive group's status is being recognized as an attractive partner too,” Hana Financial Investment analyst Song Sun-jae said.

Not only Song but also other industry officials have suggested the company's E-GMP platform is one of the key factors enticing Apple.

Carmakers have been relying on platforms in producing cars, as they allow multiple models to be assembled on the same basis. Through this, carmakers are able to save costs.

When it comes to EVs, however, not many carmakers have original EV platforms, thus multiple brands are sharing a limited number. For example, Ford will use Volkswagen's MEB platform, and Honda will use General Motors' BEV3 platform for its new EVs.

Because of this, having an EV platform is considered the next cash source for carmakers. When Hyundai Motor unveiled the E-GMP in December, its president and head of R&D, Albert Biermann, said a number of companies have already contacted Hyundai over using E-GMP.

If a Hyundai-Apple EV is assembled using the E-GMP, however, questions are remaining whether Hyundai will end up being a contractor or original design manufacturer (ODM) for Apple, and in this case, how Hyundai EVs can distinguish themselves from Apple-branded cars.

“We have to think whether Apple is considering an electric autonomous driving system or a self-driving EV as an end product,” IBK Securities analyst Lee Sang-hyun said. “Apple has been pursuing end-products in its businesses, and it is highly likely be the case in its automotive business, so that the company can set up its own ecosystem.”

In this case, industry officials said Hyundai's role in the partnership may end up being an ODM for Apple, like Foxconn assembling devices for Apple. This could help Hyundai bulk up its annual volume in the global EV market.

This would be a contrasting scenario with Hyundai Motor Group Chairman Chung Euisun's earlier plan to take the leadership in the global EV market. From the Ioniq EV series debuting this year, the company plans to roll out 23 EVs by 2025.

“There seems to be no reason for Hyundai to turn down partnership with Apple, but at the same time, there could be risks for Hyundai-branded EVs being cannibalized by Apple cars,” an industry official said on condition of anonymity. “To distinguish its vehicles from Apple cars, there has to be something else that can only be found in Hyundai's self-driving EVs.”