Alibaba Wants a Connected Car Too

Following on the heels of Baidu is another Chinese internet giant about to venture into the world of connected cars. Alibaba Group Holding Ltd, the largest e-commerce company in Asia, is entering a joint venture with China’s largest automaker, SAIC Motor Corp., to develop a car that could be available as soon as next year.

Both of the Chinese giants will jointly invest a billion yuan (US$1.6 million) to develop and operate the web-enabled car; Alibaba will use its expertise to integrate maps, communication, entertainment and cloud computing services into the “car on the Internet”. 

“In the age of the Internet economy, cross-boundary integration has become an inevitable trend,” according to a statement by SAIC. “The cars of the future must be Internet-oriented.”

The Chinese government has been encouraging companies outside the auto industry to join forces with conventional car manufacturers, to engender innovation and stir up competition in the auto industry. And the call to arms seems to be working: the country’s largest search engine operator, Baidu, confirmed last July that it is working on an autonomous car slated for a 2015 reveal; Leshio Internet Information & Technology Co., manufacturer of internet TV’s, spent the past year developing a connected car and had said that it would invest billions of dollars to do so. In other parts of the world, Google Inc. said that it is pushing to have its self-driving vehicles plying the public roads within the next five years; and the rumour around the town called ‘the Internet’ says that Apple Inc. is aiming to put its own electric car on the road by 2020.

China is not forgetting the third vital element in the mix – the infrastructure. Last October, China Mobile and Germany’s Deutsche Telekom inked a deal to create a platform for web-connected cars in China; the latter will share its technology for machine-to-machine communication while the former will provide the network. Telco equipment producer, Huawei, is working towards the so-called fifth generation mobile network, a technology still in such early stages of development that its definition is still vague; according to Huawei deputy chairman Ken Hu’s definition, 5G will allow for connections of more than a 100 billion devices at speeds of up to 10Gbps and the company has allocated at least US$600 million for R&D.

And a stable, heavy-duty network is certainly needed. Today, the number of cars with networking features is minuscule – only about 8% in the entire world, according to consulting firm, McKinsey. By 2020, however, it predicts that about a quarter of all cars – mostly from the higher end - will be connected. BMW, for instance, had begun embedding SIM cards in all its new cars since last year.

That’s good business for providers of services and hardware related to in-car connectivity. A report by GSMA, the trade body of mobile operators, predicts that revenues from these will treble in five years and will become a US$39 billion industry by 2018. That’s a lot of money to be made for those who have the foresight, and maybe that’s what Alibaba and the lot of them have. 

image: spectrum.ieee.org