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The rumor between Apple and Hyundai or Kia is confusing

As of February 9^th 2020, there are both positive and negative rumors between Apple and Hyundai Motor or Kia Corporation. On one hand, Apple is considering the American company will invest in around $3.6 billion to Kia Corporation. This positive rumor is relating to produce Electric Vehicles in Kia West Point Assembly Plant (Georgia, US).

On the other hand, several media including Automotive News Europe report that Apple pauses their discussion about EV production. Of course there is no clear announcement between both parties. However, one thing we can say for sure is that Apple will possibly be a main force in the EV market.

Who is Apple?

Of course, most people know the company named Apple Inc.. This is simply because its products and services are very famous across the globe. For example, as we discussed in the other article, iPhone is one of the most famous products in the world. In fact, unit sales of iPhone was more than 200 million per year from 2016 to 2018. When it comes to other products, iPad and Mac were sold more than 40 thousands and 18 thousands units in 2018, respectively. These numbers are incredible. We also enjoy using its services such as Apple Store, Apple TV, Apple wallet and Health service.

In addition to this, Apple is one of biggest companies or the biggest company in the world in terms of market capitalization. In fact, it actually became the first $2 trillion American company. Not only its excellence of hardware and software but also its brand value realizes this result. The company also wants to be a role model in terms of sustainability. As a result, it has already announced that it plans to become carbon neutral across its entire business, manufacturing supply chain, and product life cycle by 2030.

Who is Kia Corporation?

Kia Corporation is a South Korean multinational automotive manufacturer, and its head office is in Seoul. The company is South Korea’s second-largest automobile manufacturer after parent company Hyundai Motor Company. It owns more than a third of Kia’s shares. Kia Corporation sold more than 2.8 million vehicles in 2019.

Kia Corporation was bankruptcy in 1997 partly because of the Asian financial crisis. As a result, the company reached an agreement with Hyundai Motor Company to diversify by exchanging ownership between the two companies in 1998. The two South Korean automotive manufacturer are closely cooperating together.

Why can Apple be a mega player in the EV market?

If Apple make partners with other automotive manufacturers to enter the EV market, its impact may be huge. This is because its power to earn profit is second to none. To be specific, according to Apple’s Investor Relations, its net sales and operating income in 2020 were $274.5 billion (+6% YoY growth) and $66.3 billion (+4% YoY growth), respectively.

To compare to this result, net sales and operating income of Toyota Corporation (for simplicity, we calculate that $1 is equal to 100 JPY) in 2019 were around $300 billion and $25 billion, respectively. It means that Apple can earn profit more than twice as much as Toyota can.

However, the negative part of Apple is the fact that smartphone market is matured. For specific, the number of smartphone shipment was about 173 million in 2009 and about 1300 million in 2014. The smartphone shipment was more than 7 times for only 5 years. However, the number is stagnant now. In fact, the number of shipment was about 1400 million in 2018.

When it comes to Apple, the net sales by iPhone and total net sales in 2018 were about $165 billion and $266 billion. Thus, the sales by iPhone accounted for 62% of total sales at that time. On the contrary, both numbers became about $138 billion and about $275 billion in 2020. Therefore, the sales by iPhone accounted for 50% of total sales in 2020.

It is no wonder that Apple seeks the next hardware to be sold massively and it can be an electric vehicle. As far as we can see, there are many opportunities to earn money by hardware’s (in this case an EV) software, which is the most favorite business model by Apple.