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Alibaba flexes its muscles in the auto industry
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Auto companies and e-commerce are converging, with Internet giant Alibaba among the new players in the new realm.
Last month, the Internet giant officially set up an automobile business unit that expands existing related businesses of its online retail sites Tmall and Taobao.
Alibaba is seeking to build a platform to connect vehicle vendors and service providers with potential consumers.
A case in point is its partnership with Shanghai General Motors. Both sides have agreed to invest 1 billion yuan (US$161 million) to develop Internet-connected cars by utilizing new technologies and services such as cloud computing.
The joint venture aims to launch its first model in 2016.
Alibaba Automotive currently has partnerships with nearly 50 car brands and 10,000 car dealerships in China, serving 60 million car owners through car.Tmall.com.
In 2014, 120,000 cars were sold through Tmall.com.
Auto-related transactions, including purchases of auto accessories and services booked online through Tmall and Taobao, grew an average 70 percent for each of the past three years. Last year, transactions totaled nearly 40 billion yuan.
During last November’s Singles Day sales campaign, consumers paid deposits on 50,700 cars, five times the volume of a year earlier.
Alibaba aims to cover all car-related segments, including online marketing for new and used vehicle vendors.
“By allowing car owners to reserve cars or services at dealerships , we hope to enhance the operational efficiency of these dealers, and bring more people to their showrooms and underutilized maintenance facilities,” said Wang Licheng, general manager of Alibaba’s automobile unit.
Car owners who make appointments online for car maintenance during off-peak hours such as weekdays are eligible for a Tmall discount rate.
Alibaba’s small car financing unit and its popular Alipay arm will allow larger lines of credit for users who score well on a creditworthiness evaluation.
They will also be able to choose a car from vehicle rental partners of Alibaba without paying a cash deposit.
An independent smartphone application to be launched in July will ease the process of making reservations for automobile-related services from smartphones and let netizens peruse an array of car models and specifications.
Are carmakers willing to embrace a strong digital player like Alibaba into their industry?
Maurits Aalberse, vice president of Jaguar Land Rover China and liaison with the company’s new partnership with Alibaba, told Shanghai Daily it is all about balance — like yin and yang.
“Our flagship store on Tmall complements our dealership coverage,” Aalberse said. “The online presence of consumers is one of the highest globally. It is important that consumers can use their preferred information channel when connecting with us.”
He said an online store will be set up to reach out to more customers, especially in Tier 3-6 cities, where the Jaguar Land Rover brand isn’t so well known.
Interested potential customers will be asked to leave their contact information on Tmall, which will then be passed on to the nearest dealerships to follow up.
But the day when a car is delivered to the doorstep by the click of a mouse won’t be coming anytime soon. Purchasing car still requires a lot of face-to-face price negotiation. In the case of Land Rover, whose dealerships have been accused of overcharging on hot-selling models, it’s an even trickier issue.
The Internet, with its transparency and platforms for comparing prices, may actually be a boon to carmakers, and Alibaba can be a powerful friend in making that happen.
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