Alibaba, SAIC to make Internet cars

Vehicle producer SAIC Motor Corp Ltd and e-commerce company Alibaba Group Holding Ltd announced on Thursday they would invest 1 billion yuan ($160 million) in a fund to develop Internet-connected vehicles.

The fund, which is open to further investment from third parties, will promote the development of "cars on the Internet" and build operational platforms for Internet-connected cars, said a joint statement from the two companies.

A 50-50 joint venture between SAIC Motor and Alibaba will be set up based on the fund, which aims to roll out China's first Internet car next year.

Alibaba said that it will integrate its businesses, which range from e-commerce, finance, digital entertainment, mapping and messaging into Internet-connected cars. The effect will be to give vehicles a "brain", it said, via cloud computing and big data technology.

Internet-connected cars are seen as the foundation for smart transportation and eventually, advanced self-driving cars.

"Internet-connected vehicles can help improve the communication between people and vehicles, as well as the communication among vehicles, roads and infrastructure," said Wang Jian, chief technology officer of Alibaba.

With Internet access, vehicles will be able to communicate with each other to determine the best way to get where the passengers want to go.

Ding Daoshi, a Beijing-based Internet expert, said that rather than building its own Internet-connected cars, what Alibaba wants most is to build up an ecosystem for the Internet of Vehicles, a market that is estimated at 10 billion yuan in 2014 in China.

"Only 7.5 percent of China's 127 million vehicles last year could be classified as Internet-connected, suggesting great potential," said Ding.

Domestic Internet companies have been teaming up with vehicle makers to develop partly self-driving and Internet-connected cars.

Robin Li, chief executive officer of Baidu Inc, said that his company is cooperating with automakers to develop smart vehicles.

Neil Flynn, portfolio manager at Alcuin Asset Management, said the key issue for technology companies investing in car technology is data.

"If Alibaba knows exactly where you go, what times you typically travel, and the music and entertainment that you use while driving, it can gain a much better understanding of your behavior," he said. "It will be able to analyze the data and not only identify common trends, but will be able to forecast the services that users would most likely need and hence boost revenue."