Hyundai Motor says it is in early talks with Apple

The Hyundai logo will be shown at the #WeAreMobility trade fair at the 97th edition of the Brussels Motor Show on January 18, 2019 in Brussels.

Dirk Waem | AFP via Getty Images

SINGAPORE – Hyundai Motor shares rose 23% after the South Korean automaker reported in early talks with Apple about a possible collaboration on the development of an electric car.

“We understand that Apple is talking to a variety of global automakers, including Hyundai Motor. As the discussion is in its early stages, nothing has been decided,” a Hyundai Motor representative told CNBC’s Chery Kang.

The statement followed a local report in the Korea Economic Daily in which Apple proposed the merger and Hyundai Motor reviewed the terms. The report states that both electric vehicle production and battery development have been included in the proposal and that the car could potentially be released in 2027.

Apple declined to comment on the report.

Hyundai later released an updated statement avoiding the mention of Apple, saying, “We have received requests from various companies for potential collaboration on the development of autonomous driving electric vehicles, but no decisions have been made as the discussions are in one are early stages. “

Hyundai Motor and its affiliates’ stocks appeared in South Korea.

Hyundai Motor gained 23.06%, Hyundai Wia 27.12%, Hyundai Mobis 26.44% and Hyundai Glovis 5.26%. The shares of Hyundai subsidiary Kia Motors, the second largest automaker in South Korea, rose 12.70%.

Apple’s car

Speculation about an Apple car has been rife for several years, but nothing specific has occurred.

“In the past six years, Apple’s automotive ambitions have changed dramatically,” Wedbush Securities analysts Daniel Ives and Strecker Backe said in a note.

“Project Titan, as it is known in the halls of Cupertino, was ultimately scaled down significantly from its original ramp a few years ago and now appears to be back on the radar screen of the street,” they said.

Citing sources familiar with the matter, Reuters reported last month that Apple was pushing its self-driving car technology. According to the report, the iPhone maker wanted to produce a passenger car by 2024 that could contain its own groundbreaking battery technology.

While the report skyrocketed stocks for companies that build parts for autonomous cars, noted Apple analyst Ming-Chi Kuo said the hype was only due to speculation that some of these companies are supplying parts for the Apple car could.

Kuo warned that the market for the Apple car was “too bullish” and said he wouldn’t be surprised if the vehicle didn’t hit market until 2028 or later.

Strong investments, low margins

While Apple’s current business is based on selling premium computers, phones, and accessories, automobiles are a different sector from Apple’s traditional strength. While some Wall Street analysts see the auto sector as a new market for Apple to grow in, others say the reality of making an Apple-branded car could potentially mean high investments for low margins.

Ives and Backe said they would give a 35% to 40% chance of Apple launching their own standalone car because of “Herculean-like auto-manufacturing capabilities, battery technology ramp, financial model implications and regulatory hurdles in such a groundbreaking initiative occur “. “

“Additionally, in the autonomous space, and given security and regulatory issues, we would see a longer timeframe if Apple ultimately took this path, especially given Cook & Co.’s cautious DNA when it comes to new product launches,” said Wedbush analysts . They added that partnerships are “probably the first step” for Apple in this area.

– CNBC’s Chery Kang contributed to this report

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