November 23, 2024

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Apple logo is seen hanging at the entrance to the Apple store on 5th Avenue in Manhattan, New York on Oct. 16, 2019. (Reuters-Yonhap)

Earlier this week, Apple announced that it will ditch its decade-long electric car project, saying more resources will be poured into artificial intelligence in the future.

An Apple-made electric car had long been a buzzword across industries. Carmakers had braced for a direct threat, while tech rivals had started working on their own car projects.

But Tuesday’s surprise announcement was a reality check moment not just for the iPhone maker but also for the whole tech industry: Making an electric car proved too difficult even for Apple, one of the most innovative companies with abundant cash and top tech talent.

"When Apple first unveiled the Apple Car project in 2014, it put the traditional automakers on edge and Tesla probably felt the most heat because it could have meant fiercer competition for the electric vehicle market," said an official in the automotive sector.

"While Apple focused on developing a futuristic self-driving EV from the beginning, existing car companies focused on crafting more advanced internal combustion engines, hybrid models and EVs of late. It was a step-by-step approach for the auto industry."

Apple’s doomed car project is widely expected to affect the future strategies of its rivals across industries. There will be no exception for Samsung Electronics and Hyundai Motor Group, the nation’s top companies that seem eager to secure an earlier edge in the burgeoning mobility market ranging from autonomous cars to flying taxis.

Samsung

As Apple had been reported to be operating a car team since 2014, it also drew attention to its archrival Samsung Electronics, which appeared to be on a "better standing.”

With a wide portfolio of businesses including smartphones and semiconductors, and having strong affiliates operating in battery and auto parts, rumors were rampant that Samsung could tap into the automotive industry to produce EVs at any time.

But Samsung's top brass has repeated the company’s intention was not to make cars again since ditching its automotive manufacturing business in 1994.

Rather than making its own car, Samsung has the goal to become a "total solutions provider," producing auto parts and infotainment solutions, seeing the paradigm shift in the automotive industry with the introduction of electric vehicles.

Deemed as "moving smartphones," batteries, software and semiconductors are becoming key components, pushing away the internal combustion engines.

With its goal to expand its automotive business, Samsung made its debut in last year's IAA Mobility, one of the world's largest automotive trade shows.

“We have made clear we will not be making cars, and we have Harman to expand its presence in the automotive parts business," a Samsung official said on condition of anonymity.

But Apple’s doomed car project may become a boon for Harman, Samsung’s car audio and infotainment solutions subsidiary.

"Apple has never been seen using other firm's operating systems. It does rely on other companies for manufacturing, but it would design its own operating solutions. So if Apple did launch a car and took away market share, it would only be a minus for Harman," an industry official said.

"For Samsung, it would find it better to keep stable business relations in the growing auto parts market with its clients instead of entering a new market dominated by its clients," another industry official said.

According to Strategic Analytics, the automotive part market is expected to grow from $400 billion in 2024 to $700 billion in 2028.

In the meantime, the rivalry between Samsung and Apple is likely to heat up in the artificial intelligence sector, as Apple is reportedly shifting the employees of the car team to its AI division to focus on generative AI project.

Samsung has taken the lead in the burgeoning AI market, launching the first smartphone featuring ondevice generative AI, the Galaxy S24 series with plans to expand the adoption for other Galaxy devices.

Hyundai Motor

Apple’s decision to scrap the ambitious project to develop a self-driving electric vehicle after spending about 10 years on the Apple Car underpins the bulwark of the auto sector built on decades of practice.

Pointing out that Taiwan-headquartered Foxconn is a major contract manufacturer of Apple products, industry watchers say the US tech giant lacked manufacturing experiences and this was why there had been reports and rumors that Apple was seeking to join hands with global carmakers for the Apple Car including Hyundai Motor Group.

In February 2021, there were speculations that the Korean automaker was in discussion with Apple to co-develop autonomous driving EVs. However, Hyundai later dismissed the reports and clarified that the company was not having talks with Apple in that regard.

"Even though auto and electronics sectors are closely entangled, the (Apple Car) project stoppage shows that there are still clear boundaries between them," said an industry official.

Another implication of Apple quitting the self-driving EV project is found in the stagnant development of autonomous driving technology worldwide.

“The point of the Apple Car development was to make a smartphone on wheels and install every function the smartphone can do in a vehicle,” said Kim Pil-su, a car engineering professor at Daelim University.

“To achieve that, you need to have (the Level 4 high automation). But the Level 4 has not been achieved despite the large amount of investment by leading carmakers and promising startups.”

Defined by the Society of Automotive Engineering, Level 4 autonomous driving allows the vehicle to perform all driving tasks under specific circumstances while requiring geofencing with an option for human override. It is the second highest level of self-driving under the SAE standard.

Hyundai Motor Group bet big on autonomous driving but has not seen much of tangible results.

Aptiv, an Irish-American automotive technology company, announced during its fourth-quarter earnings conference call on Jan. 31 that it will no longer allocate capital to Motional, a 50:50 joint venture with Hyundai Motor Group, and pursue alternatives to further reduce its ownership interest.

Hyundai and Aptiv each invested $2 billion to establish Motional in March 2020. Motional has focused on developing and commercializing Level 4 high automation.

Motional, however, consecutively turned in bleak numbers as the development of autonomous driving technology showed slow progress. The joint venture logged an accumulated operating loss of about 1.5 trillion won ($1.1 billion) between 2020 and 2022.

In December last year, Hyundai decided to postpone the plan to equip the Kia EV9 GT, a large sports utility EV, with Level 3 conditional automation technology that would have allowed the vehicle to reach a speed of up to 80 kilometers per hour on the highway without the driver’s involvement. The Korean automaker also tried to apply a similar level of technology to the Genesis G90 but pushed back the plan indefinitely.

Noting that there were more variables during the road tests than it expected, the company said it decided that there should be more time to offer the quality the market expects as it looks for solutions and develops relevant technologies.

"Apple might have faced similar difficulties as Hyundai and other automakers in advancing autonomous driving technology," said another official working in the automotive industry.

"The cancellation of the Apple Car project does not necessarily indicate positive factors for the existing automakers because Apple has not shown much for the last ten years after it started the self-driving EV project. Rather, the tech giant’s pull out shows how difficult the autonomous driving sector is."

By Jo He-rim, Kan Hyeong-woo (herim@heraldcorp.com, hwkan@heraldcorp.com)