SEOUL -- Hyundai Motor Group on Monday announced its first foray into aviation with the launch of a division dedicated to "urban air mobility," an emerging field covering such services as drone deliveries and autonomous air taxis.
The move comes just a week after the South Korean automaker announced a $4 billion autonomous driving joint venture and is part of a broader plan to diversify into more cutting-edge transportation as the traditional auto market faces a global downturn.
Hyundai has brought in Shin Jaiwon, an associate administrator from the U.S. National Aeronautics and Space Administration, to lead the new division. Shin most recently led the aeronautics research mission directorate at NASA, where he shaped the agency's aeronautics research and development strategy for over 11 years.
"The new team at Hyundai will develop core technologies that will establish the company as a driving force in urban air mobility, a sector that is expected to grow into a market worth $1.5 trillion within the next 20 years," Shin said.
Hyundai did not reveal how much it is spending on the new division, but in February said it would invest a total of 2.4 trillion won ($2 billion) in futuristic technology this year, up fourfold from 2018.
The announcement comes as the global auto market grapples with slowing demand and the lingering trade war between the U.S. and China. Total auto sales worldwide dropped to 78.6 million units in 2018, from 79 million a year ago, according to data from Statista. The figure is expected to fall 2% to 77 million this year.
At the same time, analysts say investment in autonomous flying aircraft is accelerating, with implications for the future of passenger travel, military and defense applications, and freight and package transportation.
"The intersection of many technologies, such as ultra-efficient batteries, autonomous systems, and advanced manufacturing processes, are spawning a flurry of activity in this space," said Adam Jonas, a senior researcher at Morgan Stanley. "We see the development of the urban air mobility ecosystem as extremely long-dated, with up-front capital allocation, testing, and development in the short term."
But Hyundai also faces challenges. The automaker will be competing with global players that have already invested heavily in the sector. Uber has set a goal of beginning demonstration flights in 2020 and making commercial flights available in 2023. Airbus and Boeing are also developing their own passenger drones and flying cars, aiming to launch services as early as 2020, according to Deloitte.
Technology is another hurdle for Hyundai and other companies. Morgan Stanley said that limitations remain, primarily related to batteries and propulsion technology, as there are few battery-powered drones that can carry loads of much more than 10 pounds (around 4.5 kg). Reducing the cost, decreasing noise and creating aircraft that essentially levitate -- not takeoff via a runaway -- are also key considerations, it noted.
The launch of the air mobility division comes just one week after Hyundai and Dublin-based mobility technology company Aptiv announced they will form an autonomous driving joint venture by investing $4 billion together, with each owning 50% stake.
"We estimate the joint venture positively because it is the company's first meaningful open innovation that copes with changes in the future mobility," said Cho Soo-hong, an analyst at NH Investment & Securities. "It will help boost its stock price in the long term by changing its 'follower' image."