Techs and automakers are strange travel companions

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Techs and automakers are strange travel companions
Techs And Automakers Are Strange Travel Companions

Car sharing is back in fashion, at least for companies. Shares of South Korean Hyundai Motor soared on Monday on news of its negotiations with Apple regarding the autonomous electric vehicle. Details are scarce, but software sales and its high margins seem irresistible to automakers.

Hyundai confirmed Friday that it was in preliminary talks with the iPhone maker, led by Tim Cook. Local media reported that the duo plan to launch self-driving electric vehicles by 2027. Hyundai says it is “receiving requests for cooperation” from various companies. Still, investors added some 12 billion euros in value to the company led by Euisun Chung, which on Monday had a market capitalization of 49 billion.

Selling Apple software, for example, would be profitable for Hyundai and its subsidiary Kia. Germany’s Daimler recently announced a 56-inch touchscreen – dubbed “hyperdisplay” – to replace the dashboard on some luxury mounts. In addition to giving drivers a sleek new look, it provides the Mercedes-Benz manufacturer with a portal to sell subscription and download services. Software for things like assisted driving could eventually generate operating margins as high as 80%, some analysts say, compared to the margin for Hyundai’s core business, selling vehicles, of 3.4% in 2019.

Automakers can also take advantage of the high-tech momentum. The transition from gas-guzzling cars to battery-powered ones is not proving easy. The global shortage of chips, for example, has forced companies such as Ford and Toyota this month to cut back on vehicle production.

Beyond supply chain issues, traditional car companies must keep up with a staggering amount of technological know-how: Volkswagen estimates that the average number of lines of code per vehicle will triple to 300 million in the medium term, and the Fully autonomous driving could require up to 1 billion lines.

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Other alliances are in the works. Chinese search engine operator Baidu announced a partnership with local car brand Geely on Monday. The risk for automakers is that they end up as low-value manufacturers at the mercy of Apple and other Silicon Valley giants, similar to the Taiwanese manufacturer Foxconn of iPhones.

To avoid that fate, Volkswagen is spending € 27 billion over the next five years to develop its own technology systems. Joining forces may be an attractive shortcut for Chung and his colleagues, but it could prove dangerous in the future.

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