The Choice Hyundai Motor Group Must Make to Survive in the Autonomous Driving Race [Weekend Money]

Samsung Securities Stresses the Need for Direct Entry into the Robotics Business

Opinions have emerged in the market that Hyundai Motor and Kia should not limit themselves to supporting the robotics business, but instead, like competitors such as Tesla, directly enter the sector themselves.

In a recent report titled "Competitors Raise Capital at the Highest Multiples for Growth," Eunyong Lim, a researcher at Samsung Securities, stated, "If Hyundai Motor and Kia do not operate the robotics business directly, which is currently attracting significant attention in the stock market, they will lose low-cost fundraising options and the ability to attract top talent."

According to Lim, Tesla and Chinese electric vehicle (EV) companies utilize high valuation multiples as a means of raising capital. Lim assessed that Hyundai Motor and Kia's true competitors are not traditional automakers, but rather Tesla and Chinese EV firms. She warned that, as their valuation falls, Hyundai Motor and Kia may face disadvantages compared to these competitors when it comes to capital raising options and attracting talent.

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She explained that Tesla has established a virtuous cycle of securing a 200x price-to-earnings ratio (PER) valuation, which enables it to raise capital, attract talent, and accumulate data. Around the time Tesla turned profitable in 2019, it conducted four rounds of capital increases, raising $15 billion (approximately KRW 20.7 trillion). Twenty percent of its R&D expenses are paid as stock-based compensation, and, following the COVID-19 pandemic, its share price surge has built a strong fan base. In China, all of the top 10 automakers have entered the robotics sector. To achieve this, companies like BYD, Xiaomi, and Xpeng raised capital through equity issuance at PERs of 20 to 80 during their business expansion phases.

Lim emphasized that, in the era of artificial intelligence (AI), investment through high-multiple stocks benefits companies. She said, "AI requires physical assets such as data centers for computational power, and to accumulate high-quality data, the mass deployment of physical devices such as electric vehicles and robots is necessary." She added, "Large-scale capital expenditures are essential for the development of AI technology, and companies must secure significant funding. In times when investment outpaces savings, high interest rates are natural." She further explained, "The winners in this era will be those companies that can secure capital most cheaply, in the largest amounts, and for the longest durations. These companies will also establish technological moats. In this era, the cheapest form of capital is not debt, but high-multiple equity."

She assessed that Hyundai Motor and Kia would suffer more disadvantages than benefits if they remain only in a supporting role in the robotics business. Given their business structure concentrated in automobiles, they are likely to be valued at a lower multiple, which could eliminate options for capital raising, talent acquisition, and even erode their fan base. Lim noted that, as Hyundai Motor and Kia—shareholders of Boston Dynamics—face limited fundraising capabilities, this could negatively impact Boston Dynamics' corporate value. If they lack a devoted retail investor fan base, the cost of accumulating autonomous driving data could also rise.

This content was produced with the assistance of AI translation services.