Weekly Brief: Hyundai and Kia Gamble on Multi-Model EV Platform

Commentary By Andrew Tolve

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20th January 2020

EV start-up Arrival came out of stealth mode with a bang last week.

The UK company announced a cash infusion of $112M from South Korean automakers Hyundai and Kia. The investment turns Arrival into one of the most valuable start-ups in Great Britain overnight, with a valuation at $3.4Bn, even though it is yet to release its first production vehicle. It may be a new decade but, clearly, automakers’ appetite for investing big money into unknown entities that are focused on future mobility hasn’t changed.
Arrival predict a world in which EVs can be built for less than traditional vehicles thanks to a reimagined manufacturing process. Rather than build its vehicles at centralized factories and then distribute them around the world, Arrival wants to build its vehicles at “microfactories” close to the cities where they’re sold. It plans to use one modular platform that can serve as the foundation for a number of different EVs, from family cars to delivery vans and which enables the company’s products to be highly customized for its customers. It also says it can alter battery capacities and integrate sensors and self-driving tech depending on what customers are looking for. The start-up is already piloting its electric delivery vans for companies like Royal Mail and UPS.
It’s not hard to see why Hyundai and Kia are interested. At the tail end of 2019 Hyundai rolled out a new mobility strategy called Strategy 2025. Electrification plays a key role. The company pledged $35Bn to self-driving cars and EVs in the coming five years and said that it wanted to become one of the top three EV manufacturers in the world, selling 670,000 EVs each year and releasing 23 new EV models by 2025. None of that may be realistic but you can’t say it lacks for audacity.

Likewise, Kia rolled out its own vision for EVs last week dubbed “Plan S”. The carmaker says that it aims to have a suite of 11 new EVs on the market by 2025. The tangible goal is for EVs to contribute 20% of sales in each of Kia’s most important markets. The high-level aspiration is for “Kia Motors to radically transform itself into a global enterprise dedicated to spearheading customer value-led innovations,” said Kia CEO Han-woo Park. Our Paul Myles covered the Kia announcement last week and provided a nice compare and contrast between Kia’s and VW’s plans on the EV front.

With the shared investment, Kia and Hyundai will now jointly develop vehicles with Arrival, which should help both sides. Arrival gets valuable know-how and power to scale. Kia and Hyundai get innovation that can help them meet their ambitious EV goals.

Speaking of ambitious EV goals, it seems that Tesla’s outspoken aim to become the dominant electric carmaker in the world is finally coming to fruition. For years when Elon Musk said he wanted to put every single driver on the planet into an EV, people cast it off as hyperbole. For the better part of 2019 the company was mired in manufacturing delays and its stock was plummeting. Investors were thinking about jumping ship and writing it off as a loss.

Fast forward to the start of 2020 and Tesla is on a roll. The carmaker is now worth more than $90bn, making it the most valuable car company in American history, worth more than Ford ever was, more than Genetal Motors, more than Chevrolet. Its stocks surmounted the impressive $400 per share threshold in December and shot through the stratosphere of $500 per share last week. The surge has come about as Tesla’s manufacturing challenges have finally abated. In the fourth quarter of 2019 it delivered 112,000 cars to customers, its fastest ever clip and that should only increase in the near future, as its new Shanghai Gigafactory is now complete and has started delivering its first Model 3 to Chinese customers. Mock Elon Musk at your own risk.