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Hyundai and GM sign a memorandum of understanding to explore collaboration on vehicles, supply chain and clean-energy technologies, with Mary Barra, GM chair and chief executive officer, and Chung Eui-sun, executive chair of Hyundai Motor Group signing the memo. (courtesy of Hyundai Motor)

Hyundai and GM, two of the world’s five biggest automakers, are forming a partnership.

Hyundai Motor Company ranks third in the world, while GM is fifth, as well as being the biggest in the US.

The two automakers have agreed to form a sweeping alliance in such areas as manufacturing and technology development.

Since Hyundai is facing a delay in the mass adoption of electric vehicles (EV) and pressure from cheap Chinese-made EVs, the question is whether it can achieve a breakthrough through cooperation with an erstwhile competitor.

Hyundai announced on Thursday the comprehensive cooperative arrangement reached with GM while noting that the two companies have “signed an agreement to explore future collaboration across key strategic areas.”

“Potential collaboration projects center on co-development and production of passenger and commercial vehicles, internal combustion engines and clean-energy, electric and hydrogen technologies,” Hyundai said in a press release.

The two auto giants also plan to “review opportunities for combined sourcing in areas such as battery raw materials, steel and other areas.”

That basically opens the door to cooperation in every meaningful area, including the development and production of completed cars, the development of technology for the future, and the procurement of raw materials.

This is not the first cooperation partnership Hyundai has reached with another global automaker. In 2000, Hyundai formed a strategic partnership with DaimlerChrysler based on an equity acquisition and joint engine development.

But this is the first time Hyundai has pledged cooperation with another automaker on such a wide-ranging level. Indeed, there are few examples of this level of cooperation between global automakers.

The strategic partnership appears to be the result of dovetailing interests between the two automakers: Hyundai needs EV cost-cutting, GM needs hybrid technology. Demand for EVs is sluggish in the main American and European markets. Meanwhile, low-cost Chinese EV manufacturers are making inroads in Europe, which is a serious concern for Hyundai.

To make its prices more competitive, Hyundai needs to lower the cost of batteries, which represent around 40% of the cost of EVs. Partnering with GM in sourcing raw materials would mean buying at a greater volume, giving Hyundai more leverage and letting it buy materials for less.

“GM has built an extremely effective value chain for battery [raw materials] such as lithium and nickel. If the two companies source their materials together, it should make them more cost-competitive,” predicted Lim Eun-yeong, an analyst with Samsung Securities.

Since GM lacks its own hybrid model, working with Hyundai to license or develop the needed technology could help it respond more quickly to demand in the US.

One important variable is whether GM will allow Hyundai to use its North American factories.

Most Hyundai EVs sold in the US are manufactured in Korea, making them ineligible for subsidies under the US Inflation Reduction Act. But if Hyundai had access to excess capacity at GM factories, along with the EV plant it’s already building in Georgia, it could aim for a bigger share of the American market.

The two automakers plan to confirm the specific methods and areas of cooperation in upcoming discussions.

GM Chair and CEO Mary Barra said the two companies’ partnership could enhance the efficiency of vehicle development through a more rigorous allocation of capital.

Chung Eui-sun, executive chair of the Hyundai Motor Group, said the two automakers will be able to explore opportunities for boosting competitiveness in each major global market and each market segment.

By Nam Ji-hyeon, staff reporter

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