China's Internet Giant Trio 'BAT' Foray Into Auto Market With Different Priorities
Yang Haiyan
DATE:  Jan 02 2018
/ SOURCE:  Yicai
China's Internet Giant Trio 'BAT' Foray Into Auto Market With Different Priorities China's Internet Giant Trio 'BAT' Foray Into Auto Market With Different Priorities

(Yicai Global) Jan. 2 -- China's major internet companies, Tencent Holdings Ltd. [HKG:0700], Baidu Inc. [Nasdaq:BIDU] and Alibaba Group Holding Ltd. [NYSE:BABA], collectively known as 'BAT,' have forayed into the auto market, and stiff competition among the trio has spread to car manufacturing from aftermarket services. However, each firm has different priorities in their business approach.

Tencent and Baidu invested in electric vehicle startups Nio and WM Motors respectively. Alibaba recently became a shareholder of another EV firm, Xiaopeng Motors. However, the tech giants apparently have different objectives behind their moves into the EV business. 

Baidu wants to become the 'brain' of cars in future, while Alibaba hopes to develop its own operating system and monetize resources by creating a massive scenario-based shopping network that connects consumers with cars and everyday shopping scenarios. By contrast, Tencent is more interested in investing in young startups. It uses its online traffic and financial strengths to accelerate the companies' development, and reaps investment profits after floating them on the stock market.

Baidu: Creating the Android for the auto industry

Artificial intelligence is the core strategic business at Baidu, and 'home' and 'car' are the most important scenarios for AI technology applications. The firm unveiled an open-source AI platform, Apollo, last April, in a bid to corner the biggest markets for AI applications.

It is a complete, open and secure automated driving software platform that enables Baidu's partners to build their own autonomous driving systems customized to their auto and hardware products.

"Apollo marks a new milestone in the development of the auto industry. It is the 'Android' for the automotive market, but it is more open and powerful," said Qi Lu, Baidu's group president and chief operating officer, at Baidu AI Developers Conference last April.

Furthermore, Baidu's Chief Executive Officer Robin Li has moved forward the deadline for self-driving car mass production from 2019 to the second half of this year.

"Baidu will start small-scale production of driverless mini-buses in collaboration with King Long in late July 2018; develop Apollo-based self-driving vehicles and 'level-three' driverless cars in partnership with JAC and BAIC Motor respectively next year; and release a new model to be co-developed with Chery in 2020," Li noted.

The company has demonstrated a clear intention to become the brain for cars of the future. It released 10 intelligent cars jointly with Daimler, Ford, Chery, BAIC, Great Wall and King Long two weeks ago in Xiong'an New Area in the northern Hebei province.

It has come to the forefront of driving automation technology integration and planning, with similar projects unveiled in Baoding, Anhui's Wuhu, Chongqing Liangjiang New Area, Yizhuang economic development area in Beijing and the Shanghai Automotive City.

However, autonomous driving is still at an early stage despite the large number of collaborative initiatives. Baidu's so-called platform-based cooperation model does not have any exclusive binding force on the partners, so it still needs to create an example of deep-level bundling that allows open-source cooperation at the level of underlying infrastructure and therefore technology commercialization.

The search engine behemoth recently announced an investment in WM Motor close on the heels of the funding deal with Nio. The goal is to make the WM Motor partnership a model project, and introduce it to other carmakers, it said.

During the initial stages, WM Motor will benefit from the partnership in terms of providing users with remote positioning and automatic parking space search features.

Alibaba: Targeting the 'meta-scenario' service market

Unlike Baidu's purely technology-oriented strategy, Alibaba's top priority is to plan investment in the auto market within the context of its own business structure, integrating the investment operations with its existing resources.

It has used voice and facial recognition technologies to improve driver experience, and installed its payment, entertainment and map services on auto products, thereby combining online e-commerce traffic with offline resources in the auto industry.

Alibaba owes its successful expansion into the auto market to resources and effective user data that it accumulated over the years.

In future, 80 percent of the car's functionality will not be related to transportation, its founder Jack Ma once observed. It is a telling example of Alibaba's approach.

The firm teamed up with leading Chinese automaker SAIC Motor and unveiled the first 'internet SUV' (sports utility vehicle), RX5, in July 2016. The model sold very well on the market. People then realized that the e-commerce giant was serious about the auto market this time.

The only thing that differentiates RX5 from other SUV products is AliOS, formerly known as YunOS for Auto, an operating system developed by Alibaba that makes cars more intelligent and scalable.

The partnership with SAIC Motor was only the start. It set an example of successful cooperation that will convince more businesses to join Alibaba's network.

Dongfeng Peugeot Citroen Automobile and Ford have also kicked off in-depth collaborations with Alibaba.

Tencent: Buying into auto businesses as capital investment

Tencent's plan for auto business expansion is different from those of the other two Chinese tech giants. It sees itself mostly as a capital investor in the automotive industry.

It entered into a framework agreement with Foxconn and China Harmony Auto Holding in March 2015 to establish a joint venture specializing in developing next-generation smart electric vehicles. The three companies contributed CNY300 million (USD46.2 million), CNY300 million and CNY400 million, but Tencent pulled out of the deal shortly thereafter.

The rationale behind Tencent's decision is that car manufacturing entails considerable costs and involves a very long payback period, and most new automobile businesses have ended up in failure. Tencent simply does not want to take the risk, a market insider pointed out.

On the other hand, Tencent invested in Nio, an EV startup that is widely considered a leader in the fledgling new energy vehicle industry, in May 2015. Later on, it bought a 5 percent stake in Tesla in the first half of 2017, and thus became the fifth largest shareholder of the most successful EV firm in the world today. Four months later, Tencent led a buy-in of Lilium, a developer of jet-powered vehicle headquartered in Germany. 

Tencent has also invested in a number of other auto startups including ride-sharing firm Didi Chuxing and online peer-to-peer secondhand car marketplace Renrenche.com. However, thus far the firm has only played a minor part in terms of integrating and steering emerging electric vehicle businesses.

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Keywords:   Driverless Vehicle,AI,Innovation,Business Strategy,Baidu,Alibaba,TENCENT