Affordable electric vehicles and hybrid technology could be two areas of collaboration as General Motors Co. and Hyundai Motor Co. work together to cut costs and increase scale, analysts say.
The major U.S. and South Korean automakers offered few details and no timeline. But their joint announcement on Sept. 12 identified a range of areas for potential cooperation, from passenger cars and commercial vehicles to engines, battery raw materials, electrification and hydrogen technology.
The shared focus on the US as the largest market for both companies, as well as strengths in different international markets also create opportunities for them to complement each other.
Success is never guaranteed in such broad partnerships, especially with corporate cultures as different as those of GM and Hyundai. Analysts say it can take years for even the best joint projects to bear fruit.
But the surprising partnership — Hyundai has little history of collaborating with foreign automakers — opens up a wide range of opportunities as the industry faces an uncertain transition to electrification, automated driving, software-defined vehicles and a wave of rivals from China.
Automakers have delayed some EV investments and pushed back product schedules as they prepare for a longer runway for gasoline engines than previously expected. At the same time, they are racing to develop affordable EVs for the U.S. to stay ahead of Tesla and China’s BYD, which sells an EV for about $10,000 but has said it has no plans to enter the U.S.
“For all non-Chinese brands, they are facing the challenge of competing with Chinese OEMs,” said Sam Abuelsamid, principal research analyst at Guidehouse Insights. “This type of collaboration can help them reduce costs in their R&D budget.”
Accelerating speed and sharing costs are two defined objectives, in addition to finding efficiencies and increasing competitiveness.
GM CEO Mary Barra and Hyundai Motor Group Chief Executive Euisun Chung signed a memorandum of understanding to “immediately” evaluate areas for cooperation and possible binding agreements, the companies said in a brief joint news release. They did not mention the possibility of a financial alliance, but Barra said the tie-up offers the potential for “disciplined capital allocation.”
“We’re talking about two companies that really have a lot of strengths on their own looking to see how they can become stronger by working on some things together,” said Stephanie Brinley, an analyst at S&P Global Mobility. “We’re not looking at two weak competitors saying, ‘Let’s get together and try to see what we can fix.’”
Despite their strengths, both giants face shared threats in the onslaught of new competition from startups and China. In the critical U.S. market, which Chinese EV brands may target next, GM and Hyundai can support each other by sharing manufacturing capacity and a wider range of powertrain offerings.
Hyundai’s increased presence in growth markets like India and Latin America could help GM expand its reach. Hyundai could also leverage GM’s technology in its own lineup for emerging markets, where Chinese entrants are emerging rapidly.
“Protecting their share of the U.S. market is a key issue for both,” said Sanshiro Fukao, an automotive analyst and executive fellow at Itochu Research Institute in Tokyo. “Even the Koreans are very dependent on North America and really need to protect it.”
Barra has publicly discussed his openness to collaborating with other automakers, citing a desire to reduce R&D and engineering expenses on vehicle components that don’t separate one brand from another.
“There are many aspects of a vehicle that the customer wants to have working. It’s not a differentiator. I don’t buy a vehicle for its HVAC system,” she said in May at the Bernstein Strategic Decisions Conference.
For most conventional vehicles, Abuelsamid said, consumers don’t care which company makes the engine and transmission, as long as they work.
“It makes sense for them to partner and share technologies, share the investment costs,” he said. “They can still gain some benefits from economies of scale even if certain areas shrink and others grow.”
Hyundai’s work on hybrids could help GM bridge the gap between internal combustion and electric vehicles, analysts said.
Hyundai plans to debut a second-generation hybrid system in production vehicles in January, and is working on extended-range EVs that use a gasoline engine to recharge the battery. It has several hybrids on sale in the U.S. now, including a plug-in variant of the Tucson compact crossover.
GM has committed to bringing plug-in hybrids to North America by 2027, potentially in the form of full-size pickup trucks and SUVs.
“GM hasn’t fully admitted it, but they definitely need more hybridization, and Hyundai has been successful in that area,” said Sam Fiorani, vice president of global vehicle forecasting at AutoForecast Solutions.
GM already has a long-standing footprint in manufacturing, design and product development in South Korea, a legacy of its ownership of Daewoo Motors. But that business has struggled in recent years amid rising costs and falling sales in the market. A closer collaboration with hometown favorite Hyundai could offer avenues for relief.
Analysts say both automakers have strengths in their respective electric vehicle platforms: GM’s Ultium architecture and Hyundai’s E-GMP.
The companies could work together on long-term goals of affordable and profitable electric vehicles, Fiorani said.
“GM’s platforms are designed for larger, more U.S.-focused products, but there will still be a need for smaller, lower-priced models that none of them have really entered the market with yet,” he said.
Fiorani said Hyundai could source EV batteries from GM’s Ultium Cells joint venture with LG Energy Solution to help it comply with federal tax credit regulations. The automakers are working to source battery minerals and assemble EVs in North America so buyers can qualify for $7,500 federal tax incentives.
Hyundai is working with LG on a U.S. battery plant in Georgia, making the supply of battery raw materials a potential area of collaboration, said Ed Kim, president of AutoPacific. Both automakers want to reduce battery costs and increase energy density.
“The biggest expensive challenge in EVs is around the battery,” Kim said. “That’s where the obvious opportunities for collaboration between the two automakers really exist.”
While GM has a long history of collaborating with competitors internationally, Hyundai does not. It’s unclear how well the South Korean company can find shared priorities, compromise and get along with strangers on the other side of the world, said Ian Park, an automotive manufacturing analyst at S&P Global Mobility in Seoul.
“Both OEMs will have to overcome differences in organizational culture, control tower issues, intellectual property rights and balanced allocation of resources,” Park said. “Hyundai has never had a specific partnership with another OEM. So how they resolve these factors will be of paramount importance.”
Analysts note that resolving differences could take a long time.
In Japan, for example, Nissan and Honda announced a similarly broad strategy to evaluate areas of collaboration in March. Six months later, they have only narrowed their focus and said it will take another year to determine the potential for working together on software.
If possible, the software could hit the market in 2028 at the earliest.
Furthermore, analysts emphasize that achieving mass volume and sharing components is only part of the equation. Traditional automakers must also rethink their business models to take advantage of the low costs and advanced technologies of new players.
“Automotive alliances used to be successful because of economies of scale,” said Itochu Research’s Fukao. “But the Chinese never talk about the number of vehicles they make. Their profits won’t come from making vehicles. They’ll come from their apps, services and software.”
Rather than teaming up with another traditional metal bender, GM and Hyundai might have been better off teaming up with a partner from the software or computing world, Fukao said.
That’s where GM and Hyundai really lack expertise and where they both need outside help in transitioning to tomorrow’s technology, he said. The joint statement from GM and Hyundai did not mention the words “software” or “digital.”
“That’s why I wonder if this can be successful,” Fukao said. “It’s very old-fashioned. Everyone needs to align with someone who has strong applications in software-defined vehicles.”