Hyundai bets on Canoo to supercharge its electric vehicle plans

Hyundai Motor Group has struck a deal to develop electric vehicleswith Los Angeles-based startupCanoo. Under the terms of the agreement, announced on Tuesday, Hyundai and its Kia affiliate will gain access to Canoo’s engineers and technology as the two South Korean automakers look to expand their production of EVs. Hyundai and Kia both recently announcedplans to invest heavily in electric technology over the next six years, including a$110 millionjoint investment in U.K. startup Arrival, which also counts United Parcel Service Inc. as an investor,to build electric commercial fleets.

Canoo, founded in 2017 by a pair of former BMW executives, plans to sell electric vehiclesby subscriptionstarting in 2021 in Los Angeles and San Francisco. In September it unveiled its first model,aseven-seat van that co-founder Ulrich Kranz calls “a loft on wheels." Canoo uses a modular “skateboard" architecture: The powertrain, batteries andsuspension are contained within a slim platform that can support different cabins and exteriors, or “top hats" in the industry parlance.

Hyundai and Kia planto usethe Canooplatform for both private cars and commercial fleets. In a statement announcing the deal, Hyundai said it expects Canoo’s skateboards will allow forthe standardized development and assembly of a range of vehicles and for a flexible design that can respond quickly to customer preferences.

“We were highly impressed by the speed and efficiency in which Canoo developed their innovative EV architecture, making them the perfect engineering partner for us,"Albert Biermann, Hyundai’s head of research and development, said in thestatement.

Both Canoo and Hyundai declined to disclose financial terms. The agreement expires later this year but can be extended if Canoo meets set milestones.Kranz said Canoo remains open to working with other automakers. The company is usingan undisclosed contract manufacturer to build its own vehicles.

While both Hyundai and Kiahave introduced all-electric offerings in the past few years—the Kona and Ioniq from Hyundai, the Niro and Soul from Kia—they remain small players, especially in the U.S. market. Kia said it plans to offer 11 electric vehicles by 2025, with 25% of sales coming from “eco-friendly" vehicles. Combustion-engine SUVs, including the new three-row Hyundai Palisade, are the main source ofprofits for the company.