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© Reuters. FILE PHOTO: Automobile producers show their wares on the present ground of the North American Worldwide Auto Present in Detroit

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By Hyunjoo Jin and Stephen Nellis

SEOUL/SAN FRANCISCO (Reuters) – Executives in Hyundai Motor Co Group are divided over a possible tie-up with Apple Inc (NASDAQ:), with some elevating issues about changing into a contract producer for the U.S. tech large, dimming the outlook for a deal.

Hyundai stated earlier this month it was in preliminary talks with Apple, however gave no particulars. Native media stated the corporations have been discussing an electrical automotive and battery tie-up.

Apple declined to remark.

Apple has by no means acknowledged talks with the automaker about constructing automobiles, and it was unclear whether or not any such talks are nonetheless lively. The iPhone maker usually insists on strict secrecy from its potential companions and suppliers about future plans or unreleased merchandise.

In an earnings name on Tuesday by which it reported its finest quarterly revenue in over three years, Hyundai didn’t give any updates on talks with Apple or point out whether or not they stay lively.

“We’re agonizing over methods to do it, whether or not it’s good to do it or not,” stated a Hyundai govt conscious of the interior discussions on the tie-up with Apple. “We aren’t an organization which manufactures vehicles for others. It’s not like working with Apple would at all times produce nice outcomes.”

Few particulars are recognized in regards to the talks between the 2 corporations. However folks near the discussions say the choices thought-about included Hyundai or Kia performing as a producer for automobiles designed by Apple and offered beneath its highly effective, ubiquitous model.

Hyundai is historically recognized for its reluctance to work with outsiders, making engines, transmissions and even its personal metal in-house beneath its vertically built-in provide chain as South Korea’s second-largest conglomerate. Though shares in Kia and Hyundai have surged due to the talks, there’s appreciable opposition to changing into an Apple contract producer, which may maintain up any cope with the American large, these folks stated.

Apple and Hyundai first began talks over a automotive partnership in 2018, when Apple’s effort, referred to as “Venture Titan,” was headed by Alexander Hitzinger, who’s now a Volkswagen (DE:) govt, stated an individual conversant in the matter. However progress was hampered by the South Korean automaker’s reluctance to work with outsiders, the particular person stated.

These talks haven’t been beforehand reported.

“It’s actually troublesome (for Hyundai) to open up,” this particular person stated, including that the South Korean firm would prone to have to interchange some executives to keep away from a tradition conflict beneath any partnership with Apple.

“Apple is the boss. They do their advertising and marketing, they do their merchandise, they do their model. Hyundai can be the boss. That doesn’t actually work,” the particular person stated.

The South Korean automotive producer, nonetheless, has extra capability. Contract manufacturing would assist it safe manufacturing quantity.

NOT LIKE FOXCONN

One other particular person conversant in the matter stated Apple would favor to supply main elements of its personal design – frames, our bodies, drive trains, and different elements – from quite a lot of locations and depend on Hyundai or Kia for a remaining meeting website.

“They might need this to be in america,” the second particular person stated.

Whereas the talks are at an early stage, Hyundai Motor Group has “tentatively determined” that it will need Kia to companion with Apple, not Hyundai Motor, a Hyundai insider stated.

“The Group is anxious that the Hyundai model would change into simply Apple’s contract producer, which might not assist Hyundai in its effort to construct a extra premium picture with its Genesis model,” the insider stated. Kia can be transferring sooner by way of electrical vehicles, and it has accessible manufacturing capability at its Georgia manufacturing facility in america.

One other govt at Hyundai stated: “Tech corporations like Google (NASDAQ:) and Apple need us to be like (contract cellphone maker) Foxconn.

“A cooperation could initially assist elevate the model picture of Hyundai or Kia. However within the mid- or longer-term, we are going to simply present shells for the vehicles, and Apple would do the brains.”

Nonetheless, there are broad areas the place the 2 corporations may gain advantage, together with entry to Hyundai’s electrical automotive platform and its suppliers, corresponding to battery makers, in addition to entry to Apple’s autonomous car stack and software program, stated Park Chul-wan, a South Korean battery skilled and a professor at Seojeong College.

“Hyundai can be greater than only a Foxconn,” he stated.