SEOUL/NEW YORK (Reuters) - Hyundai Motor Group will invest $1.6 billion in a joint venture to develop self-driving vehicle technologies with Aptiv (APTV.N), the biggest overseas investment by the South Korean carmaker to catch up to rivals in the autonomous car market.
Global carmakers and their suppliers are forging alliances to develop autonomous car technologies partly due to the need to share the huge financial and technical burdens. Hyundai has lagged global rivals who have invested heavily into developing new technologies for electrified and autonomous vehicles.
Hyundai Motor (005380.KS), Kia Motors (000270.KS) and Hyundai Mobis (012330.KS) will collectively contribute $1.6 billion in cash and $400 million in research and development resources and others, valuing the joint venture $4 billion, Hyundai Group and Aptiv said in a joint statement.
Dublin-headquarterd Aptiv, which will own 50% of the joint venture, will contribute its autonomous driving technology, intellectual property, and about 700 employees focused on the development of scalable autonomous driving solutions.
Aptiv Chief Executive Kevin Clark in a joint interview with Hyundai Executive Vice Chairman and heir apparent Euisun Chung on Monday the joint venture at this point would not get involved in running ride-hailing, data or network services of its own.
Instead, the new firm would begin testing fully driverless systems in 2020 and have a production-ready autonomous driving platform available for robotaxi providers, fleet operators and automakers in 2022.
“Uber is developing its own technology, but potentially our technology could be better than theirs and then they could also become our customers,” Chung said through a translator.
Hyundai Motor aims to commercialise its own autonomous vehicles in 2024.
Clark said the alliance would initially focus on self-driving technology for passenger vehicles. But Chung said the Aptiv partnership ultimately also could help Hyundai speed up automation for commercial vehicles, such as long-haul trucks.
The executives said their technology would be tested and developed across Asia, Europe and the United States to offer products tailored to major markets. They said they would discuss additional alliance members going forward.
The new joint venture will be based in Boston, with technology centers across the United States and Asia.
U.S. President Donald Trump, speaking before a meeting with South Korean President Moon Jae-in, said the deal would reinforce the alliance between Washington and Seoul.
Aptiv, which manufactures vehicle components and provides technology for self-driving cars, was formerly known as Delphi Automotive, which was split into Aptiv and Delphi Technologies (DLPH.N) in 2017.
Deutsche Bank said in a report that Hyundai’s cash injection would enable Aptiv to cut its near-term funding needs. But Deutsche questioned whether the new structure could deter other automakers from sourcing autonomous systems from Aptiv in the future.
Aptiv’s major customers include GM, Volkswagen (VOWG_p.DE) and Fiat, according to its annual report. Hyundai Motor is also one of its customers, a Hyundai spokesman said.
The latest investment is another sign that Hyundai has abandoned its strategy of developing technology in-house, a strategy which previously raised investor concerns that it may be left behind in the race for future mobility.
Hyundai, which along with affiliate Kia Motors ranks fifth in global sales, has joined rivals in making a series of investments in technology firms, including self-driving car tech startup Aurora, especially after Chung was promoted a year ago.
Hyundai Motor said in February that it would invest 14.7 trillion won ($12.3 billion) in future technologies such as self-driving, connectivity and car-sharing areas by 2023.
In March, Hyundai Motor and Kia announced a plan to invest $300 million in Indian ride-hailing platform Ola, following the $275 million that the pair invested in Singapore-based ride-hailing firm Grab last year.
The Aptiv venture will be headquartered in Boston. The transaction is subject to regulatory approval and is expected to close in the second quarter of 2020.
Reporting by Hyunjoo Jin and Ju-min Park in Seoul and Tina Bellon in New York; Editing by Emelia Sithole-Matarise and Stephen Coates