Hyundai soars after saying it’s in early talks with Apple to develop car

South Korean automaker Hyundai Motor said it’s in the early stage discussions with Apple on working together to develop an electric car. Josh Lipton joins ‘Closing Bell’ to report. Subscribe to CNBC PRO for access to investor and analyst insights…

Hyundai soars after saying it's in early talks with Apple to develop car

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South Korean automaker Hyundai Motor said it’s in the early stage discussions with Apple on working together to develop an electric car. Josh Lipton joins ‘Closing Bell’ to report. Subscribe to CNBC PRO for access to investor and analyst insights on tech and more: https://cnb.cx/3dIH56N

Shares of Hyundai Motor surged 19% after the South Korean automaker said it was in early-stage talks with Apple over potentially working together to develop an electric car.

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

The statement followed a local report from the Korea Economic Daily that said Apple suggested the tie-up and Hyundai Motor was reviewing the terms. The report said both electric vehicle production as well as battery development were 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 that avoided the mention of Apple and said, “We’ve been receiving requests of potential cooperation from diverse companies regarding development of autonomous driving EVs, but no decisions have been made as discussions are in early stage.”

Shares of Hyundai Motor and its affiliates popped in South Korea.

Hyundai Motor rose 19.42%, Hyundai Wia added 21.33%, Hyundai Mobis gained 18.06% and Hyundai Glovis was up 0.75%. Shares of Hyundai affiliate Kia Motors, which is the second-largest automobile manufacturer in South Korea, surged 8.41%.

Apple’s car
Speculation about an Apple car has been rife for several years but nothing concrete has materialized.

“Over the last six years we have seen many twists and turns in Apple’s automotive ambitions,” analysts Daniel Ives and Strecker Backe from Wedbush Securities, said in a note.

“Project Titan as its been known within the halls of Cupertino has ultimately been significantly scaled down from its initial ramp a few years ago and now appears to be front and center again on the radar screen of the Street,” they said.

Citing sources familiar with the matter, Reuters last month reported that Apple was moving forward with its self-driving car technology. The report said the iPhone-maker was targeting to produce a passenger vehicle by 2024 that could include its own breakthrough battery technology.

While the report sent shares soaring for companies that build parts for autonomous cars, prominent Apple analyst Ming-Chi Kuo said the hype was purely on speculation that some of those companies may supply parts for the Apple car.

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

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

Ives and Backe said they would assign a 35%-40% chance of Apple launching its own standalone car due to the “Herculean-like auto production capabilities, battery technology ramp, financial model implications, and regulatory hurdles involved in such a game changing initiative.”

“In addition, on the autonomous front and given safety/regulatory issues we would see a longer timeframe if Apple ultimately heads down this path especially given the cautious DNA of Cook & Co. in launching new products,” the Wedbush analysts said. They added that partnerships are “likely the first step” for Apple in this space.

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