Alibaba Group Holding Limited (BABA - Free Report) has made yet another move to strengthen its presence in the automotive space.
The company has teamed up with Ford Motor Company (F - Free Report) to explore new opportunities in the connected car space. The deal is in line with the Chinese conglomerate’s strategy of gradually merging online and offline retail.
Following the news, the company’s share price surged 1.07%, eventually closing at $174.47. Also, on a year-to-date basis, shares of Alibaba have steadily treaded higher. The stock has returned 98.7% compared with the industry’s gain of 57%.
The e-commerce giant has signed a three-year agreement with the Dearborn-based automaker to identify new ways of selling vehicles in China.
Per the deal, Ford will use Alibaba’s T-Mall online marketplace to sell cars in China. The automaker would use Alibaba's operating system AliOS, Alibaba Cloud, digital marketing system Alimama and retail platform Tmall.
Besides sales, the two will work together in many other areas such as cloud computing for big data analysis, artificial intelligence (AI), mobility, and connectivity.
Daniel Zhang, CEO of Alibaba Group, said, “Alibaba is excited to redefine the consumer journey and user experience for automobiles together with Ford Motor Group,” adding, “Our data-driven technology and platform will expand the definition of car ownership beyond just having a mode of transportation and into a new medium for a smart lifestyle."
New Retail to Get a Boost
The retail giant, which gives stiff competition to Amazon (AMZN - Free Report) and ebay (EBAY - Free Report) in China, has a broader objective of tapping China’s massive retail space that includes both online and offline forms. Notably, offline retail currently constitutes 84% of total retail sales in China despite the enormous growth of e-commerce in the last few years.
Keeping this in mind, the company is working on the development of what it calls “New Retail” to bridge the gap between online and offline shopping using its big data capacity. Alibaba expects that the system will give brick-and-mortar retailers new opportunities to evolve across marketing, inventory and distribution networks.
Alibaba’s partnership with Ford is also a part of its New Retail strategy. It plans to leverage on its big data capacities to explore new retail opportunities in this space. Although people prefer touching, feeling and driving cars before buying them, doing the basic research and purchasing online would be more appealing than visiting multiple showrooms.
Much like other technology companies, Alibaba too is making all efforts to boost its presence in the fast growing auto industry.
In this regard, Alibaba first teamed up with SAIC Motor last year to explore the connected car space. Reportedly, more than 400,000 vehicles across China’s roads are powered by Alibaba's operating system AliOS today.
Now, it is not clear if Ford cars would be powered by AliOS. Nonetheless, this is the first deal between Alibaba and an automaker from outside China. Not to mention, in the process, the Alibaba is going bring even more pain to those who continue to bet against it.
That said, chances of Alibaba making an attempt to collaborate with other big players like General Motors (GM) and Honda Motors to give tough competition to its peers, too are high.
It would be interesting to see how the competitive atmosphere builds up in China, as Alibaba places itself in direct competition with early movers like Apple, Baidu and LeECO. Nevertheless, we agree that Alibaba's latest venture with Ford will allow it to embed deeper into the new retail revolution and grab a greater share in the auto industry.
Alibaba currently has a Zacks Rank #2 (Buy). You can see the complete list of today’s Zacks #1 Rank stocks here.
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