[Exclusive] Hyundai Motor Group Invests Trillion-Won Scale in Autonomous Driving Subsidiary... CEO Also Replaced

Strengthening New Businesses Including 'Level 4' Autonomous Driving Technology Development
CEO Replacement and Organizational Expansion
Preparing for Full-Scale Investment Initiation

Autonomous bus operated by Forty-two Dot (42dot)
[Image source=Yonhap News]

[Asia Economy Reporter Kwangho Lee] Hyundai Motor Group is injecting a large-scale fund into its subsidiary, the autonomous driving startup ‘42dot’. At the same time, it is restructuring the workforce including the CEO and expanding the organization in preparation for a major investment.

According to the investment banking (IB) industry on the 5th, Hyundai Motor Group is pushing for an investment in 42dot worth trillions of won. Following the acquisition of 42dot for about 450 billion won, additional investments are being made. This move is interpreted as an effort to strengthen new businesses such as Level 4 autonomous driving element technology development, robo-taxi, and robo-shuttle urban demonstration projects.

Organizational changes aside from investment are also drawing attention. Cha Doowon, Executive Director and Head of the Mobility Research Institute at Kia, was confirmed to have moved to 42dot on the 1st. Inside the company, it is highly likely that Executive Director Cha will become the next CEO. The current CEO, Song Changhyun, is expected to move to Hyundai Motor Group’s future mobility strategy control tower, the Global Strategy Office (GSO), focusing on vehicle software (SW).

Hyundai Motor Group incorporated 42dot as an affiliate as part of building a global SW center. Hyundai Motor acquired 2,129,160 shares of 42dot for 274.662 billion won, securing a 55.9% stake, while Kia purchased 1,186,106 shares for 153.08 billion won, securing a 37.3% stake. The combined stake of the two companies reaches 93.2%. The remaining 6.8% is held by CEO Song and strategic investors (SI).

Hyundai Motor Group’s acquisition of 42dot is considered one of the most surprising mergers and acquisitions (M&A) deals in the business and startup sectors this year. The valuation set at the time of investment was around 570 billion won. Since an additional investment worth trillions of won is planned this time, the valuation is expected to leap to several trillion won.

An IB industry official said, “Tesla actively utilizes software, solving recall issues through over-the-air (OTA) software updates,” adding, “Hyundai Motor is also trying to strengthen its software capabilities by empowering 42dot.” He continued, “However, the global competition is currently very fierce,” and “that is why they are trying to win with a large-scale investment.”

42dot currently possesses Level 4 autonomous driving technology. It has reached a level where the vehicle can recognize and respond to internal and external situations on its own even when the driver cannot drive directly. Development work is underway aiming for commercialization by the end of 2023. The plan is to focus on advancing autonomous driving technology solely through software without using devices such as Lidar sensors.

Founded in 2019, 42dot is an ‘autonomous Transportation-as-a-Service (aTaaS)’ startup. aTaaS means that autonomous driving technology is installed in all moving transportation means. CEO Song, who previously served as Chief Technology Officer (CTO) of Naver and CEO of Naver Labs, founded the company. From its inception, it has attracted market attention by expanding cooperation with Hyundai Motor Group.

Hyundai Motor Group is conducting post-merger integration (PMI) work after acquiring 42dot. It is discussing plans to integrate the autonomous driving division, TaaS headquarters, and the AI technology dedicated organization Airs Company into 42dot. This is interpreted as a move to transfer existing Hyundai Motor Group organizations to 42dot and nurture it as a core affiliate of the group. However, it is expected that maintaining independence and autonomy as a startup will be difficult.

Meanwhile, major financial investors (FI) who invested in 42dot include IMM Investment, Daol Investment (formerly KTB Network), Stick Ventures, and POSCO Technology Investment. Most succeeded in early exit (investment recovery) within one year of investment. However, it is evaluated that they received a relatively disappointing exit performance at about 1.3 to 2 times the principal investment.