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Reasons behind Audi’s partnerships with Chinese tech giants Baidu, Alibaba and Tencent

Volkswagen’s luxury car unit Audi has agreed to deepen collaboration with Chinese internet giants Baidu, Alibaba and Tencent (known as BAT) to offer more digital services in its largest global market.

On September 11, Audi China and the brand’s joint venture FAW-Volkswagen signed tripartite memorandums of understanding (MOUs) with BAT in Shanghai. The partners will deepen their cooperation in the areas of data analysis, internet-vehicle platform building and urban intelligent transport.

As the first of its kind and the only car manufacturer that has signed agreements with BAT, Audi is at the forefront of connectivity and telematics in the Chinese market.

 

What is Audi’s ultimate aim?

The responses from the top managements of Audi and FAW-Volkswagen can be the best answers.

“China has become an important lead market for digital technologies. Baidu, Alibaba and Tencent are strong innovators. We are determined to work with them on features for the connected car of the future,” said Joachim Wedler, president of Audi China.

“As the leader of China’s premium auto market, FAW-Volkswagen Audi has always set the pace for innovation. The new strategic cooperation strengthens our own digital capabilities and also China’s auto industry as a whole,” said Zhang Pijie, president and member of the board of management of FAW-Volkswagen.

In China, Audi has already operated its largest research and digital capabilities development facility which places a strong focus on key future technologies like connected car, piloted driving, new energy vehicles and digital services.

The partnerships with BAT will strengthen the digital footprint of Audi in the world largest auto market and will be supported through the brand’s strong development capabilities in China.

 

What can BAT offer?

Alibaba – digital ecosystem 

Alibaba is the leading e-commerce giant in China with its own digital ecosystem of online-to-offline (O2O) services (e.g. auto e-commerce, online payment, entertainment and aftermarket services) which provides comprehensive solutions and services covering the end-to-end vehicle ownership lifecycle and the whole mobility value chain to the automotive market. In 2104, Alibaba purchased Chinese interactive mapping and navigation firm Autonavi for $1.5 billion. And in March 2015, it announced a partnership with SAIC and jointly invested $160 million to develop connected cars. And their first internet car – the Roewe RX5 SUV with YunOS operating system – hit the market in July.

In cooperation with Alibaba, Audi has integrated real time traffic data into Audi MMI and has become the first premium manufacturer in China to offer high-resolution 3D maps.

 

Baidu – big data and vehicle connectivity

As the leading Chinese search engine provider, Baidu provides a new whole picture of intelligent search for users and developers through big data, cloud computing, deep learning and other core technologies with strong technical support. The strategy of Baidu includes: open cloud, data factory and Baidu brain. Its driverless car has finished road tests and succeeded in autonomous driving in mixed road conditions in December 2015.

And Baidu CarLife, a locally-designed software, offers music streaming, smartphone integration, and access to Baidu maps.

Starting from 2017, Audi will launch Baidu CarLife in its local model line-up, for seamless transfer of Baidu’s popular app services between the customers’ digital devices and their cars.

 

Tencent – online social giant

Tencent is the largest online social and gaming company in China, and it has integrated the backend data from Qzone, WeChat and e-commerce products to establish an ecosystem for end users. Tencent has teamed up with Foxconn Technology and China Harmony Auto to build a smart electric car.

“In China, it’s very common to send your location (to your friends) in your WeChat: you will use it in your car, and have your destination automatically sent if you want,” said Intakhab Khan, Audi’s director of electronics in China.

The automaker plans on integrating Tencent’s WeChat MyCar services, an auto-focused feature based off the highly popular social messaging service WeChat, that will adapt location and music sharing services for cars.

 

Tough competition

As many as 60 percent of Chinese drivers would switch car brands solely in order to have complete access to data and applications inside their vehicle, according to consultancy McKinsey.

Chinese consumers want to up-to-date interactive maps showing places of interest like restaurants and shops as well as access to social messaging and games, which are driving both global and local automakers to provide “connected” car services, including internet access, entertainment systems, traffic information, etc.

And due to the fact that Google services are blocked in China, global automakers have to work with local internal giants, and cross-boundary collaborative partnerships between automotive and internet companies are prevalent in China. Examples include BAIC and LeTV, BAIC and Didi-Kuaidi; Chery, Pateo and Yidao; BMW and Baidu; Baidu and Uber, PSA with Alibaba, etc.

However while the large tech giants are working with automakers for now, some may soon become competitors themselves as non-traditional players begin to disrupt the linear automotive value chain.

At the Beijing auto show this past April, both Alibaba and Baidu unveiled their own self-driving cars, while online video giant LeECO displayed its LeSEE Super Car Concept.

So, in the relentless war of electric- connected-autonomous cars in China, cooperation if there is an option, but competition is without question.

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