Apple’s Self-Driving Electric Vehicle Partner Choice Explained

Multiple sources have confirmed that Apple (NASDAQ: AAPL) is finalizing a deal with Hyundai-Kia to begin developing their much anticipated “iCar.”

The vehicles are expected to be fully autonomous, electric, and assembled at the Kia plant in West Point, Georgia.

The tentative plan is to begin production in 2024, though insiders familiar with the talks between the two companies say the eventual rollout could be pushed back.

No final agreement has been signed just yet and Apple may even decide to partner with multiple automakers.

AAPL stock did however rise more than 2% on the news.

finviz dynamic chart for  AAPL

I’ll update you when we have more information, but for now let’s assume Apple and Hyundai-Kia are partnering up.

Why would Apple choose Hyundai-Kia? And why would the Korean automaker strike a deal with Apple?

Here’s Why an Apple-Kia Deal Makes Sense for Both Sides

For Apple, building a car opens the potential to tap into the $10 trillion global auto and mobility market.

That’s 20 times bigger than the $500 billion annual smartphone market.

Since Apple already has about one-third of the smartphone market, they see moving into the car market as a great way to diversify their revenue.

Think about it this way… Apple would only need a 1.67% share of the auto market to be the size of their iPhone business.

And Hyundai-Kia makes sense because its large North American presence will allow Apple to control the hardware and software that will go into the vehicle.    

This will be an “Apple Car” after all – NOT be a Kia model featuring Apple software.   

For Hyundai-Kia, the company’s new chairman, Euisun Chung, is primarily responsible for deciding to work with Apple.

Chung knows that autonomous vehicles will be a big part of the future. So, by working with Apple, Hyundai-Kia will be able to accelerate the development of their own autonomous and electric and vehicle plans.

Additionally, the Kia plant in Georgia has available capacity. So, scaling production by tapping into Hyundai-Kia’s supply chain can be done relatively quickly.

While it is unknown what the first Apple Car will look like, those familiar with the plans say the first models will not be designed to have a driver.

Autonomous, electric vehicles designed to operate without a driver could mean Apple cars will initially operate as robotaxis that deliver packages and food.

This would bring Apple into direct competition with Tesla (NASDAQ: TSLA) – which is soon planning to roll out self-driving features for its vehicles.

On the company’s earnings call last Wednesday, Tesla CEO Elon Musk explained to investors that turning Teslas into self-driving robotaxis could help justify the company’s $800 billion valuation.

The thinking is… Tesla can earn profit more from each car produced as they would be working autonomously throughout the day and earning money for making deliveries.

In 2018, Apple hired Tesla’s senior VP of engineering to work on self-driving cars.

Apple has since hired many more former Tesla employees and Musk even said that he once attempted to start talks with Apple about acquiring his electric car company…

But Apple CEO Tim Cook rejected his invitation to meet.

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