Weekly Brief: Hyundai’s Government Backing Could Win Self-Driving Race

After years of playing a laggard, Hyundai intends to rebrand itself as a leader in the mobility revolution.

It took a step in the right direction last week when it announced plans to invest $35Bn in mobility solutions over the coming five years. The project includes connected cars and electric vehicles but Hyundai will devote the lion’s share of the investment to developing self-driving cars. The carmaker says that it plans to have fully autonomous vehicles on the road by 2022 and for sale as robo-taxi fleets by 2027.

Is Hyundai dreaming? Maybe. The carmaker currently lacks expertise when it comes to software technology and just throwing a lot of money at the problem doesn’t guarantee a positive outcome. Witness Uber’s experience over the past five years for a cautionary tale. On the other hand, last month Hyundai announced an impressive $4-billion joint venture with self-driving car leader Aptiv, which gives it a solid foundation to build on moving forward. Even with the huge investment, a three-year timespan is still probably unrealistic given how much ground the carmaker has to make up. Then again, pretty much every target date that every player in the self-driving car industry throws out there needs to be taken with a grain of salt. Ultimately, the date matters less than the investment and the strategic direction. On both those fronts, Hyundai’s news last week was significant.

So, too, was the fact that the South Korean government plans to be a key partner in Hyundai’s activity on the self-driving front moving forward. The country’s President Moon Jae-in was at the automaker’s headquarters last week for the announcement and he showed up with a slew of related announcements of his own. He pledged to invest $1.87Bn of federal funds to expedite the development and deployment of self-driving cars. A big part of that will go toward building out the requisite infrastructure for self-driving cars and EVs.

His goal is for fully self-driving cars to represent 50% of new car sales by 2030. More importantly, he wants to take a defibrillator to South Korea’s flagging economy and he hopes the self-driving car industry can help provide the jolt. “The self-driving market is a golden market to revitalize the economy and create new jobs,” the president said in his remarks.

The close relationship between government and carmaker shouldn’t come as a surprise if you know much about South Korean history. Hyundai is one of the country’s so-called “chaebols”, family-run conglomerates that are largely to thank for the country’s remarkable transition from a poor, agriculture-based society in the 1960s to the world’s 11th largest economy by 2016. Much of that growth came about owing to aggressive government-backed loans that helped companies like Hyundai and Samsung explode onto the world scene. South Korea’s economy has diversified in recent years but the 10 largest chaebols (Hyundai included) still represent more than a quarter of all business assets in the country.

No wonder, then, that the president was at Hyundai headquarters. What will be interesting to see is if his support will translate into the country jumping over some of the more expected countries, including the US, Germany, the Netherlands and Japan, by becoming one of the first to take self-driving cars mainstream. You would think the US would outpace Korea, given how much activity is already afoot here today, but skepticism among American consumers combined with greater ethical qualms and less direct government support could lead to a surprise. That’s why most analysts expect China to win the driverless car future. Could Korea be next?

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