INTERNET: Alibaba Drives with SAIC, Uber; Tencent Hijacks Google

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Bottom line: A new global tie-up with Uber marks a major advance for Ant Financial’s Alipay, while new Internet car initiatives by Tencent and Alibaba are unlikely to find big audiences despite getting big resources from their backers. 

Alibaba, Tencent car initiatives drive ahead

A series of stories involving Alibaba (NYSE: BABA) and Tencent (HKEx: 700) reflect the growing importance China’s leading Internet firms are placing on cars, which could be the next major battleground for web-based services. Alibaba is in 2 related headlines, including one that says its affiliated Ant Financial unit has signed a major tie-up that will allow anyone in the world to use its Alipay electronic payments service to pay for Uber hired cars.

The other 2 headlines both involve car manufacturing, including one that says mass production has begun for the first Internet-equipped model co-produced through a tie-up between Alibaba and SAIC (Shanghai: 600104), China’s leading car maker. The other headline says a car-making venture backed by Tencent has been quietly poaching workers from the likes of Google (Nasdaq: GOOG) and Germany’s Daimler (Frankfurt: DAIGn), as it gears up for its own production.

Alibaba and Tencent are actually slightly behind in the race to develop cars powered by the Internet, which can do everything from assisting in self-driving vehicles to providing car-based entertainment services. Search leader Baidu (Nasdaq: BIDU) has been a Chinese leader in the driverless car arena, copying global rival Google, while online video giant LeEco (Shenzhen: 300104) has also aggressively moved into the space over the last year.

We’ll begin this car round-up with Ant Financial, the financial affiliate of Alibaba that’s eyeing a multibillion-dollar IPO in China and Hong Kong as soon as next year. Media are reporting the company’s newest tie-up will make Alipay a payment option for users of Uber car services throughout the world. (English article; Chinese article)

The move is hugely symbolic, since it puts Alipay in the same category as such global giants as Visa (NYSE: V) and MasterCard (NYSE: MA) as it tries to become China’s first global electronic payment service. Alipay is fighting that battle with homegrown rival UnionPay, and this particular tie-up marks a big victory for Alipay in that particular rivalry.

Auto Show Debut

Next there’s the news about Alibaba, whose first Internet car, the Rongwei RX5, made its official debut at the nation’s largest auto show in Beijing at the end of last month. (Chinese article) An SAIC executive says in a new interview that the cars will formally go on sale in the second half of this year, and he uses all kinds of buzzwords like “big data” and “cloud services” to describe some of its capabilities.

I haven’t seen too much written about this particular car, and suspect it’s just one of SAIC’s existing models with some new Internet hardware to offer mapping and other location-based services (LBS) like finding nearby restaurants. I doubt the car will be a big seller, except perhaps among techies. But the partnership certainly brings together 2 big names from the Internet and auto sectors, and could eventually produce some interesting products.

Finally there’s Tencent, which is quietly building up its Future Mobility joint venture that it recently established to make self-driving cars with Taiwanese electronics giant Hon Hai (Taipei: 2317), owner of the Foxconn (HKEx: 2038) brand, and China Harmony New Energy Auto Holding (HKEx: 3836). Reuters reported the venture has hired the leading designer from Google’s driverless car project, and also a top executive from Mercedes-Benz’s North America driverless car unit. (English article)

This kind of poaching is relatively common throughout the world, and big Chinese names like Tencent and Baidu can increasingly entice top executives from western firms with big salaries and promises of big growth opportunities. One analyst points out that many of these Chinese companies are late to the driverless car game and most are unlikely to succeed. But you have to start somewhere, and we should at least commend the big Chinese names for trying to compete in this emerging space with big growth potential.

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