INTERNET: Tencent Joins Baidu, LeTV In Smart Car Race

Bottom line: New smart car initiatives from Tencent, LeTV and Baidu are all likely to struggle, with Baidu most likely to be first to drop out of this race to copy Internet giant Google.

LeTV car to debut at Shanghai Auto Show

China is quickly living up to its copycat reputation in the smart car space, with the latest word that Tencent (HKEx: 700) will enter the business in a tie-up with Taiwanese contract manufacturing giant Foxconn (HKEx: 2038). That pair are following Google (Nasdaq: GOOG) into the area, but they certainly aren’t the first Chinese to mimic the world’s largest Internet company.

That distinction would probably go to Chinese Internet search leader Baidu (Nasdaq: BIDU), which last year announced its own smart car initiative that was also back in the headlines this week as CEO Robin Li discussed the plan. Yet another similar initiative is also in the headlines today, as online video sensation LeTV (Shenzhen: 300104) discussed its own plans to show off its first smart car at the Shanghai auto show next month.

This kind of copycatting and bandwagon mentality has become all too common among China’s Internet companies, who all worry about getting left behind by the competition. Most or all of the big names have launched various smartphone initiatives, copying similar drives by Google and Microsoft (Nasdaq: MSFT). More recently they’ve also piled into smart TVs, copying gadget leader Apple (Nasdaq: AAPL).

This kind of herd mentality seems almost doomed to failure, in no smart part because the Chinese companies often aren’t sure what exactly they’re copying due to the newness and rapidly evolving nature of the products. Accordingly, I wouldn’t give any of these 3 new smart car initiatives a very big chance for success. Instead, I suspect all 3 companies will lose hundreds of millions of dollars in the process before quietly shelving their plans.

Let’s start this smart car round-up with Tencent, which will reportedly enter the arena in partnership with Foxconn and China Harmony Auto (HKEx: 3836), a relatively unknown Hong Kong-listed automaker. (Chinese article) The story cites an unnamed Foxconn source as saying the trio will sign a strategic tie-up that will see them make cars with a strong Internet connectivity element.

It’s unclear if this alliance will be as ambitious as some of the others that are trying to make driverless cars, or whether it will simply try to make cars that have lots of Internet connectivity. I do have quite a bit of respect for both Foxconn and Tencent, though their choice of a relatively obscure car maker like China Harmony Auto seems a bit odd. We’ll have to wait for more details before giving a better assessment of chances for success, though I’m still quite skeptical at this stage.

Next there’s LeTV, which announced its smart car initiative late last year and is now saying it will debut its first model next month at the Shanghai Auto Show, China’s largest annual car show. (Chinese article) Unlike the other 2, LeTV is specifically choosing electric vehicles for its smart car drive. LeTV is making the cars in partnership with recently listed BAIC Motor (HKEx: 1958), one of China’s largest but also least innovative car makers that has no particular track record making commercial electric vehicles.

Again, we’ll have to wait and see what the new car actually looks like and how it performs. But I’m not particularly optimistic about its prospects, even though I do admire the huge success that LeTV has found in its core online video space.

Last there’s Baidu, which announced its driverless smart car initiative last year and now is saying the first models will make their debut later this year. (Chinese article) Baidu founder and CEO Robin Li discussed the plan at an event this week in Shenzhen, but didn’t provide any other new information, including the name of its car-making partner.

Perhaps this car will also make its debut in Shanghai next month, though that seems less likely since Li didn’t mention it in the interview. Regardless of when the debut comes, I again wouldn’t hold out very high expectations for its success. Of these 3 companies, Baidu has the worst record for creating new products outside its core online search area. But that said, I should also compliment the company on being the smartest about knowing when its new products are duds, and would expect it to quickly abandon the smart car race if and when its new product flops.

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