Tech Giants Merge with Car Makers

Tech Giants Merge with Car Makers

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Apple and Kia have almost come to an agreement, while Ford and Google have already signed it. Yes, you do get it right. If you’re perplexed with what cooperation they’re up to, we’re on the same side. Let’s find out.

Apple and Kia Motors, are you kidding?

At the end of 2020, the company from Cupertino announced its resignation to enter the car market in 2024 with a remotely piloted vehicle. It was said at once that Apple would cooperate with a large car maker.

Later it became known that the company was seriously considering South-Korean Hyundai Motors as a possible partner. However, the Asian conglomerate became concerned that the cooperation with the IT giant could deteriorate its own position in the market, so it gave its place to its subsidiary – Kia Motors.

More details

According to CNBC, the parties are close to an agreement, while Bloomberg is suggesting a date already – February 17th. According to the agreement, the carmaker will get 3.6 billion USD from the IT company for creating and releasing the so-called Apple Car.

The electric car will be produced on the US plant of Kia Motors. However, it will be released under the Apple brand and feature all the latest Apple soft- and hardware.

What about Ford and Google?

On February 1st, it became known that the companies have signed a six-year agreement, by which the carmaker will integrate Android software in its cars, such as Google Maps, voice Google Assistant, or the Google Play market.

Moreover, Ford Motor will use the cloud service of the tech company, its instruments for data collection and analysis, machine learning, and AI technologies.

What are the goals of the companies?

A Morgan Stanley analyst Katy Huberty thinks that Apple got tempted by the volumes of the world car market – 10 trillion USD annually. Compare it to the smartphone market, which amounts to 500 billion USD a year. Then why not risk and try to create a product that will yield as much income as smartphones taking just 2% of the segment.

As for Ford Motor, the company is not only carrying out a planned reorganization and optimization of production, logistic, and analytic processes but is also seeking yet another source of income.

Selling cars is, indeed, cool, but why not offer extra paid services to your clients? Such as access to extra functions and services. Adam Jones, also an analyst from (guess where?) Morgan Stanley suggested that by selling such access per 10 USD a month, Ford Motors will be able to make 5 billion USD a year easily.

A new source of income means new perspectives. The expert says that thanks to the cooperation with Google, the stock price of the carmaker can rise to 25 USD. Now it is hardly over 11 USD.

How did the market react?

The most impressive reaction was the sky-rocketing of Kia stocks. On February 3rd, when it was heard that the company might get 3.6 billion USD from Apple, the stocks grew by 9.65% to 97.7 KRW. The positive trend holds: when this article was being prepared, the stocks cost 101.5 KRW.

The quotations of other companies mentioned grew less impressively: Apple (AAPL) stocks grew by 2.58% to 137.39 USD, Alphabet (GOOGL) – by 3.6% to 1893.07 USD, Ford Motor (F) – by 2.85% to 10.83 USD.

Summing up

We’re witnessing an amazing process of large representatives of the car and IT spheres. Ford Motor has signed a six-year agreement with Google, by which all Fords and Lincolns will carry soft- and hardware by Google, while the work processes of the company will be facilitated by cloud and AI technologies.

As for Kia Motors, if things go smoothly, it will be producing a pilotless car for Apple. The latter company has already announced it is ready to give 3.6 billion USD to its South-Korean counterpart.

2021 is truly amazing, so packed with astonishing events, isn’t it?

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