Alibaba and the e-car treasure: The tech giant wants a piece of the pie

Alibaba and the e-car treasure: The tech giant wants a piece of the pie

Episode seven of a ten-part series with which heise/Autos takes a look at the Chinese car market. There, Chinese electric car manufacturers are warming up – partly with strong support from the so-called Communist Party – in order to soon roll up the domestic and international markets with a lot of momentum and a colorful bouquet of the most modern cars. This should not remain without consequences for the German car manufacturers, whose largest single global market has been China for several years.

On the one hand, this will foreseeably change the picture on German and European roads, but will also have an impact on German producers and their sales in China, the world’s largest single market.

It’s sheer size that amazes tech giant Alibaba. When the group went public in 2014, it raised $21.8 billion. More than Google, Facebook and Twitter combined when they went public. When investor Yahoo decided to sell its 11 percent stake in 2019, it brought in $40 billion. Alibaba is now represented in almost all areas of Chinese online trade. Now the group senses profits in the automotive sector – and is pushing into this niche.

Alibaba is well known to many Europeans. It’s something like the Amazon of China, but much more. For example, Alibaba also has its own payment system with Alipay. Customers of the subsidiary Ant Financial can operate online banking or apply for microloans. With a company value of around 150 billion US dollars, this company alone is considered the world’s most valuable start-up. There are also subsidiaries that offer online map services, cloud computing and online auctions. In short: Alibaba is one of the most powerful tech giants in the world.

Alibaba is omnipresent on smartphones in China. The platform has become an integral part of Chinese life.

(Image: Alibaba Group)

A tech giant is looking for new profits

This giant wants to get into the automotive industry, because with the advance of electric cars, increasing digitization and connectivity, completely new value creation opportunities are opening up here. The classic manufacturers simply lack the know-how to use them. Enormous investments would be needed for Volkswagen, BMW or Mercedes to be able to compete with Alibaba in the software area on an equal footing. VW is trying Cariad. The success is, at least so far, quite manageable.

Market observer Ferdinand Dudenhöffer summed it up to the Table.Media newsletter service as follows: “Automakers can think about how they want to enter this new world. Some claim they can acquire the skills themselves. Others prefer to buy them because the Investment and learning costs are relatively high.”

The group is one of the most valuable companies in the world.

(Image: Alibaba Group)

German manufacturers cooperate with Alibaba

The German manufacturers are currently trying both. Alibaba is in the car at both BMW and Volkswagen. BMW is all about connectivity support. The two companies also jointly operate a technology center in Shanghai. The aim is to discover promising start-ups that could help BMW bring innovative products to market. Or just Alibaba. At Volkswagen, Alibaba is helping with autonomous driving and also with connectivity. All of the collaborations have only been in place since 2019.

The group takes a more digital approach to mobility. The group sees itself as an (important) supplier.

(Image: Alibaba Group)

Alibaba has been working with SAIC since 2016. Some vehicles run on Alibaba’s YunOS operating system and are equipped with Alibaba’s digital and intelligent map material. There are also cameras and software for voice control and connectivity. In addition, Alibaba co-founded the IM Motors brand with SAIC, a manufacturer of premium electric sedans and SUVs. In addition, the tech giant is involved in countless companies, all of which work as suppliers in the automotive industry. From the software company DeepRoute, which produces artificial intelligence for autonomous driving, to navigation and map providers.

Digitization business worth billions

The car market in China has changed due to increasing digitization. “The market for e-cars is at a point where other arguments count for customers. Above all, the software and connectivity solutions. These can be played out inexpensively across all vehicles and model series,” explains Alexander Will, Senior Expert at McKinsey, for example in Shanghai, at Table.Media. This is a huge market opportunity for Alibaba. The business could work in such a way that customers buy a (cheap) car and book individual functions as needed. Seat heating only in winter, navigation only for vacation trips and autonomous driving only for long-distance business trips.

Dennis Schwedhelm, Senior Expert at the McKinsey Center for Future Mobility, explains: “On the one hand, it’s about additional income, for example through entertainment or insurance, and on the other hand it’s about cost savings, for example through predictive maintenance of vehicles. Our estimate is that in this area by the end of the decade there will be a three-digit billion amount in value that can not only be realized by car manufacturers.” But this requires software that can be used across all series. And a computing power that will not be overwhelmed in a few years when several updates have been installed.

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(fpi)

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