Internet trio set for clash in auto market

Leshi Holding (Beijing) Co's super electric vehicle concept illustrates "LeOS is OK. Ready to drive" displayed on the dashboard. [Photo/China Daily]

The automobile industry has officially become the latest battleground for China's three Internet giants after Tencent Holdings Ltd announced a foray into smart cars.

The owner of China's most widely used instant messaging app WeChat has teamed up with Taiwan's Hon Hai Precision Industry Co Ltd and luxury car dealer China Harmony Auto Holding Ltd to explore a business model to manufacture and sell smart electric cars.

The Shenzhen-based Tencent did not reveal the details of the partnership, but the move puts it in direct competition with rivals Baidu Inc and Alibaba Group Holding Ltd, which have already expanded into the country's nascent market for Internet-enabled car sector, in partnership with leading automakers.

Earlier this month, Alibaba and SAIC Motor Corp Ltd announced the setting up of a 1 billion yuan ($163 million) fund to support the development of "cars over the Internet".

Analysts and insiders attribute much of the growing interest in the auto sector to the thirst by Internet companies to gather customer data.

As Tencent made its announcement, online video firm Leshi Internet Information & Technology Corp also revealed it was teaming up with homegrown automaker BAIC Motor Corp in building smart cars.

Neil Flynn, an Internet expert and portfolio manager at Alcuin Asset Management, said he simply considers cars as devices, much like mobile phones or tablet computers.

"There are about 100 million cars in China. That large number of drivers represents an invaluable customer base for Internet companies. By digitizing every aspect of your life, these firms can gain a stronger understanding of who you are and what you do. With that knowledge, they are able to generate more revenue from each user," said Flynn.

Pan Wei, an analyst with Beijing-based Internet consultancy Analysys International, said the strong innovation-led Internet expertise of Baidu, Tencent and Alibaba is expected to ignite a frenzy in developing the market of Internet-enabled vehicles.

"In some small and particular sectors, the involvement of Internet heavyweights usually leaves little room for smaller rival players," said Pan.