To China’s largest technology companies, the next frontier for promoting their services lies inside cars.
The country’s web giants are rushing to partner with auto makers to manufacture internet-connected vehicles, where drivers and passengers can access online services such as entertainment, navigation, shopping and social media through in-car displays. The idea, already popularized by Apple AAPL -0.64%’s CarPlay and Google GOOGL -0.52%’s Android Auto in the west, is leading to a more contested race in China as the country is poised to become the largest market for such intelligent vehicles, says Yale Zhang, an analyst at Shanghai-based consultancy Automotive Foresight.
Jack Ma, Alibaba’s founder and chairman, spoke during a launch event for the Roewe RX5 car in Hangzhou, in eastern China’s Zhejiang province.E-commerce giant Alibaba and SAIC Motor launched a new internet-enabled vehicle, equipped with the e-commerce giant’s YunOS operating system on July 6.(Photo by STR/AFP/Getty Images)
Audi , for example, signed agreements with Alibaba , Baidu and Tencent to build connected cars last week. The luxury German carmaker owned by Volkswagen will get traffic data from Alibaba, embed Baidu’s CarLife connection app and integrate Tencent’s instant-messaging app WeChat into its models.
Other auto companies have made similar moves. In July, Chinese automaker SAIC Motor unveiled the Roewe RX5, a sports utility vehicle that uses Alibaba’s YunOS operating system, which helps drivers order meals, find parking spaces and pay for purchases through the company’s Alipay payment system. Baidu’s CarLife, a service similar to Apple’s CarPlay, is now used by eight auto companies including China’s Chang An and BYD , according to its website.
The market is poised for big growth. Currently only 8.5% of all cars on the road are “connected”, meaning they allow remote control from smartphones or internet-enabled updates for maps and other contents, according to data provider and analytic firm IHS IHS +%. In 2025 the number will rise to 45% globally and 38% in China.
China is particularly enthusiastic about connected vehicles. About 60% of respondents in China, already the largest auto market worldwide, say they will switch brands for improved connectivity services, compared with an average 37% elsewhere, according to a McKinsey report released last year.
“Most big OEMs (original equipment manufacturers) have got their connected vehicles on the road already,” says IHS senior analyst Michael Liu. “The cooperation with internet companies will greatly improve the infotainment user experience in car.”
Getting into this race will also enable the internet companies to collect massive amounts of user and transportation data that can be developed into products such as an intelligent transportation system, according to Automotive Foresight’s Zhang.
Alibaba is likely to have an advantage here because its YunOS operating system is built into connected cars like the Roewe RX5, and can store more data on the vehicles’ performance and drivers’ internet usage as opposed to a standalone app such as Baidu’s CarLife and Apple’s CarPlay, Zhang says.
China is also keen to have its own connected vehicles. The Society of Automotive Engineers of China, a government-affiliated industry association, says locally developed technologies should account for 50% of the country’s internet-connected car market in 2020 and 60% in 2025, the official Xinhua News Agency reported last week.
Currently, Apple’s CarPlay is usable in China while Google’s services remain inaccessible after the company exited the country in 2010 following censorship disagreements. The market is still at early stages with no clear leader so far, says IHS’s Liu.
