Volkswagen in Talks to Make Electric Cars in China

The Wall Street Journal, September 7, 2016

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A VW dealership in Louisville, Ky., in August. PHOTO: BLOOMBERG NEWS

German auto maker plans joint venture with state-run China Anhui Jianghuai Automobile

SHANGHAI— Volkswagen AG is exploring a joint venture to make electric cars in China with a state-run company, part of its aggressive push into electric-vehicle production as the auto maker works to resolve its emissions cheating scandal.

The German car maker signed a memorandum of cooperation with China Anhui Jianghuai Automobile Co. for a potential partnership, the companies said in separate statements. Jianghuai said the two will be equal owners of the joint venture, and hope to reach a formal agreement within five months.

“As we aim to be at the forefront of e-mobility, Volkswagen Group is looking forward to explore all options to set up a close and mutually beneficial partnership with JAC,” said Volkswagen CEO Matthias Müller. The company is targeting sales of a million electric vehicles a year world-wide by 2025.

Volkswagen, which derives more than a third of its global vehicle sales from China after three decades of operations there, currently has two car-making partners in the country: SAIC Motor Corp. in Shanghai and FAW Group Corp. in the northeast. Under government rules, foreign car makers must tie up with local partners to produce cars.

China limits foreign auto companies to two local partners to make gasoline-powered vehicles. While the limit doesn’t apply to electric cars, most foreign companies choose to produce alternative-energy vehicles with their existing partners. Officials at SAIC and FAW didn’t respond to requests for comment. Analysts say Volkswagen may be able to strike a more favorable deal with Jianghuai than its current partners.

“You may get a better agreement from a company who values your technology more. SAIC and FAW may already have [electric-vehicle] technologies and do not need VW as much as JAC,” said Bill Russo, a Shanghai-based managing director at consultancy Gao Feng Advisory Co.

General Motors Co. plans to launch about 10 alternative-energy cars with its Chinese partners, SAIC and Wuling, by 2020. Nissan Motor Co. and its partner, Dongfeng Motor Corp., launched an all-electric car in China in 2014.

Wednesday’s disclosure follows Volkswagen’s purchase of a 16.6% stake in U.S.-based heavy truck maker Navistar International Corp. this week. Jianghuai, of Hefei in east China’s Anhui province, is a major truck maker in China. It also builds conventional and electric cars. Earlier this year, Jianghuai signed a 10 billion yuan ($1.5 billion) agreement with NextEV Inc., an electric-car startup backed by Tencent Holdings Ltd. and Sequoia Capital, to develop electric vehicles.

China is going all in on alternative-energy vehicles, as it seeks to cut dependence on oil imports and reduce air pollution. Beijing also regards electric cars as a shortcut for its companies to reach the forefront of an evolving global auto industry.

Chinese governments at all levels last year spent a total of 90 billion yuan ($14 billion) in the sector, including direct cash subsidies for electric-vehicle makers and construction of public charging stations, says UBS Securities.

Sales of electric and hybrid cars and buses quadrupled in 2015 from the previous year to 331,000 vehicles. In the first seven months of this year, sales of such vehicles rose 23% to 207,000 units.

Volkswagen’s current strategy review calls for accelerating development of electric vehicles. Over the next decade, Volkswagen plans to develop around 30 new battery electric-car models, which could account for as much as 25% of the car maker’s total sales.

The company has said it expects to launch the first fully autonomous vehicles by the end of the decade.

Bill Russo to Chair “Future Cars” Panel at September Automotive Roundtable

Shanghai, China, September 1, 2016

Inbox Microsoft Outlook, Today at 2.33.36 PM

As the development of automotive electronics and telematics is gaining speed, intelligent car applications are gradually and successfully integrated in our daily lives.

The numerous advantages of latest technologies do not only include an improved driving experience or enhanced safety, but also the evolution towards less fuel consumption and more sustainable driving.

Therefore, the September Automotive Roundtable in Shanghai will discuss promising trends of future cars in China and its latest applications in several areas, such as Driver Assistance Systems, Autonomous Driving, Automotive Multimedia & Communication, Connected Vehicles and Online Services in China.

– in cooperation with Autoköpfe –

– Strategic Partner: EU Chamber –

When: Thursday, September 01, 2016, 6 pm

6:00 – 7:00 pm: Registration and Networking Dinner, incl. buffet dinner

7:00 pm: Presentation:

By Mr. Roger Looney, VP of Vehicle Engineering – Vehicle Systems Development, including Electric Drivetrain & Autonomous Driving, Qoros

Roger Looney has 30 Years experience in automotive tooling, engineering and design and over 20 years experience in Asia. Current goals include utilizing that knowledge and experience to develop world class, exciting vehicles of the future.
Specialties: Automotive Product Development and Launch, Electronics, Hybrid & EV development, Asia Mergers and Acquisitions, Six Sigma, Product Development, New Business Development in Asia, Team Building in China, Low Cost Country Sourcing, Contract Development and Negotiation in China, Korea, Japan.
 

7:20 pm: Presentation: Integrated Mobility, Transportation Redefined

By Mr. Bevin Jacob, Head of Biz Dev, APAC, Continental Intelligent Transportation Systems

An ‘Internet of Vehicles’ enthusiast, Bevin Jacob envisions building and incorporating “Mobility Services” to improve Consumer’s digital lifestyle. He has 16 years of active involvement in building “Connected Solutions” for Mobile, Telematics and Multimedia Devices. Bevin enjoys working with highly motivated teams to bring about disruptive innovations in connected vehicles business.

7:40 pm: Panel discussion: Future Cars

Moderator: Mr. Bill Russo, Managing Director, Gao Feng Advisory Company

Bill Russo is the Shanghai-based Managing Director and the Automotive Practice leader at Gao Feng Advisory Company. His over 30 years of experience includes 15 years as an automotive executive, including 12 years of experience in China and Asia. He has also worked nearly 12 years in the electronics and information technology industries.  He has worked as an advisor and consultant for numerous multinational and local Chinese firms in the formulation and implementation of their global market and product strategies. While the Vice President of Chrysler North East Asia, he successfully negotiated agreements with partners and obtained required approvals from the China government to bring six new vehicle programs to the market in a three-year period, while concurrently establishing an infrastructure for local sourcing and sales distribution. Mr. Russo has a Bachelor of Science in Chemical Engineering from Columbia University in New York, and a Master of Science in Manufacturing Systems Engineering from Lehigh University in Bethlehem, Pennsylvania. Mr. Russo is a highly sought after opinion leader on the development of the China market and the automotive industry.

Panel additionally includes:

 Ms. Vanessa Moriel, Managing Director Asia, Liase Group

Vanessa Moriel is Managing Director Asia with the LIASE Group, a global retained executive search firm & talent management consultancy that specializes exclusively in automotive and mobility companies. 

Ms. Moriel has been providing CEO & top management placements and succession expertise for global automotive companies across the Asia-Pacific region for close to 15 years. She previously worked for Schlumberger, the London Consulting Group, Frito-Lay (Pepsico) and Fiducia Management Consultants. 

She holds a Bachelor’s degree in Chemical Engineering for the Institute of Technology and Superior Studies of Monterrey and has completed an Executive Program in Strategy and Organization from the Stanford Graduate School of Business.

Mr. John Shen, Managing Director, Accenture Strategy, Greater China

Mr. Shen Jun has more than 20 years of industry and management consulting experience. He is now Managing Director with Accenture Strategy Greater China. Before he joined Accenture, Mr. Shen was Senior Partner at Roland Berger Strategy Consultants and has been leading the Automotive Competence Center (ACC) in Greater China. Mr. Shen has served many leading MNC/local companies in automotive industry, covering a wide range of topics. Mr. Shen has in-depth knowledge and expertise in the functional areas of corporate strategy, merger and acquisitions, operational benchmark, organizational restructuring and sales and marketing management (especially on branding, channel optimization, pricing and new product launch), etc.

8:10 pm: Q&A

Where: Courtyard by Marriott Shanghai Jiading 上海绿地万怡酒店

            3101 Huyi Highway, Jiading District, Shanghai 201821, P.R.C
上海嘉定区沪宜公路3101号

~~~~~~~~~~~~~~~~~~

Fee: 250 RMB/Person for annual spinsors, incl. buffer dinner, free flow soft drinks and beer

350RMB/Person for non-sponsors, incl. buffet dinner, free flow soft drinks and beer

(Please note only cash or pre-payment via bank transfer is accepted)

Hotel Room Information: The participants of Automotive Roundtable can enjoy the special rate of the hotel room: Superior Room: 550 RMB/night (incl. 1-2 breakfast). To book the room, please email to:

Ms. YILIA JIANG

Assistant Sales Manager

cy.shajd.sales.exe3@courtyard.com

Tel: 86.21.3991.6816,  mobile: 139.1831.2521

and indicate rate code of “Automotive Roundtable”.

Language: English

Seats are limited! If you like to attend, RSVP via email

kathrin@g-i-events.com or lucia@g-i-events.com by August 30, 2016.

In case you register but cannot attend, please cancel your reservation before August 30. Otherwise you will be invoiced for the event.

Thanks to all our sponsors and our media partner!

If you are interested in sponsoring, speaking or participating, please feel free to contact us at: info@g-i-events.com.

 

The Explosive Growth Opportunity in China’s Automotive Aftermarket

Gao Feng Insights Report, August 2016

We are pleased to share with you our paper titled: The Explosive Growth Opportunity in China’s Automotive Aftermarket.  In this report, we examine one of the major discontinuities shaping the future of the Chinese auto market:  the rapid expansion of the independent aftermarket (IAM).

China’s automotive market is transitioning from a period of rapid growth in new car sales to a slower pattern of expansion going forward.  While this slower pattern of growth is a concern for automakers and suppliers, the market remains at historically high levels of sales, and the car population continues to expand at double digit rates annually.  In addition, the average age of the vehicle population is rising.  Add to this a recent push by the Chinese government to allow sales of original equipment service (OES) parts by independent service providers, coupled with the emergence of digital platforms for accessing services, the conditions are ripe for discontinuous expansion of the independent aftermarket.

All of these factors are contributing to an explosive expansion of the automotive aftermarket services business in China.  In this environment, automakers and suppliers are seeking ways to offer a clear and differentiated value proposition in order to succeed in the aftermarket, and they must act quickly to compete with new entrants who are seeking to disrupt the traditional service model.

We welcome your comments and feedback on our briefing paper or in general about our firm. We would be glad to meet you in person to share our data and perspectives in a fuller manner. Please let us know if you are interested in meeting and discussing directly how we can help you to operationalize these insights.

Thought leadership is core to what Gao Feng does. We will, from time to time, share with you our latest thinking on business and management, especially as it relates to China and China’s role in the world.

Best Regards,

Bill Russo
Managing Director, Gao Feng Advisory Company
bill.russo@gaofengadv.com

Robert Zhang
Senior Associate, Gao Feng Advisory Company
robert.zhang@gaofengadv.com

Emily Wang
Senior Consultant, Gao Feng Advisory Company
emily.wang@gaofengadv.com

Disrupting the Disruptors: The Merger Of Uber China And Didi Chuxing

Forbes, August 8, 2016

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I co-authored this article with my colleague Edward Tse, CEO of Gao Feng Advisory Company

On August 1st, Didi Chuxing (Didi)and Uber China announced a plan to merge their businesses in China, effectively placing Didi in control of their combined ride-hailing business for the China market.  This deal has attracted a great deal of attention since the announcement, raising a number of critical questions which we address in this article, including:

  • Did the China government play any role in the merger?
  • Can foreign tech companies compete in China?
  • Did Uber China win or lose?
  • Could Uber China ever have become a dominant player in China if it decided to press ahead?
  • What will this deal mean to Uber and Didi’s global strategies?

China has become the epicenter of a disruptive wave of digital innovation, and the rapidly evolving landscape of partnerships for mobility services is a clear indication of this.  For sure, we can look forward to even more exciting developments in the future.

Click here to read the article at Forbes.com

Uber-Didi Merger Has Chinese Consumers Worried

The Sixth Tone, August 2, 2016

A passenger holds a smartphone showing the Didi Chuxing application, Shanghai, May 22, 2016. Qilai Shen/Bloomberg via Getty Images/VCG
A passenger holds a smartphone showing the Didi Chuxing application, Shanghai, May 22, 2016. Qilai Shen/Bloomberg via Getty Images/VCG

by Fan Yiying

After a prolonged price war for ride-hailing customers, Chinese market leader Didi Chuxing and its biggest rival Uber merged on Monday. Now, passengers are worried this will mean a quick end to heavily discounted trips.

Shanghai native Ma Yanyan, 29, rides with either Uber or Didi to work every day. She told Sixth Tone that she has noticed Uber is sending fewer coupons to its users. “As a consumer, I’m very realistic,” she said. “I’ll go back to taking taxis once Uber raises its prices.”

Wang Mengyan, 25, is a frequent user of ride-hailing apps, and she is afraid the merger will mean higher prices. “As a consumer,” she told Sixth Tone, “we want to see competition between Didi and Uber so that we can enjoy the best discounts.”

Yang Mengyi, 28, told Sixth Tone she spends about 150 yuan (about $22) on Didi every week, but that she thought the merger wouldn’t have much of an impact. “Taxis will always be another option,” she said, adding that she prefers cabs because they are more strictly regulated.

Online, many net users echoed Yang’s opinion, saying that if prices rise too high, they will just go back to using regular taxis. News of the merger — and the possible end of discounted fares — has cab drivers delighted.

Chen Yugang, a taxi driver in the northern coastal city of Tianjin, expressed his relief after Monday’s news. He told Sixth Tone that he used to earn about 5,500 yuan per month before the emergence of car-hailing apps. His current monthly income has decreased to less than 3,000 yuan. “Why would passengers take a cab and pay me 20 yuan when they can ride with Uber for as low as 5 yuan?” he said.

Chen said that companies like Uber have disturbed the market, and he hopes the merger will bring consumers back to traditional taxis.

Bill Russo, an automobile consultant at Gao Feng Advisory Company in Shanghai, told Sixth Tone he estimates pricing may move somewhat higher after the merger, but that “it can’t be much higher for the simple reason that ride hailing services need to compete with taxis.” He added that, to Uber and Didi, the real purpose of the merger isn’t to increase prices, but to decrease costs in the form of incentives given out to passengers and drivers in order to win market share.

Full-time Shanghai-based Uber driver Xing Zhiwei told Sixth Tone that the news of the merger has him concerned. “In less than a year, the allowance for 12 rides has dropped from 150 yuan to 40 yuan,” said Xing, adding that he fears such driver subsidies will drop even further.

Zhuang Chunhui, a communications manager for Uber China, told Sixth Tone on Tuesday that the incentive policy for drivers will not change after the merger. She said that the amount of subsidies varies in different cities at the different times. “The discounts we offer to our users will also change from time to time,” she added, “but this has nothing to do with the merger either.”

Wang Mingze, a public relations manager for Didi Chuxing in Shanghai, said the merger will enable the company to increase the efficiency with which it accepts orders, and that this “can eventually increase the drivers’ incomes.” As for passengers, Wang said price is just one part of the service. “What’s more important is whether users can book the car and enjoy a comfortable ride whenever they want,” he said.

Additional reporting by Wang Lianzhang.

Click here to read the article at sixthtone.com

This car company ripped off Land Rover. Here’s why it might get away with it.

The Washington Post, July 19, 2016

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(LEFT) The 2017 Range Rover Evoque Convertible is debuted during the
Los Angeles Auto Show in Nov. 2015, in Los Angeles (AP Photo/John Locher).
(RIGHT) Jiangling Motor Co.’s Landwind X7 SUV is displayed at the
16th Shanghai International Automobile Industry Exhibition in April 2015
(Tomohiro Ohsumi/Bloomberg).

The cars are basically indistinguishable unless you hone in on the exact stitching of the seats or the fine arrangement of the headlights. Even then, changes are so minuscule, it’s nearly impossible to realize one of these vehicles costs $41,000, and the other just $21,700.

British luxury carmaker Jaguar Land Rover and Chinese carmaker Jiangling will go to court this summer in China to settle their dispute over what exactly is fair game in the auto industry. Can Chinese companies continue to get away with “shanzhai” — a Chinese term for prideful counterfeiting — of car designs?

Range Rover’s Evoque and Jiangling’s Landwind X7 are practically the same car to the untrained eye.

It’s a judicial battle that pits Western car companies against the burgeoning Chinese and East Asian market, and one that has captured the attention of economists, auto industry insiders and intellectual property experts.

The Chinese consumer market has grown exponentially since late 1980s economic reform. Some of the largest growth has come from auto companies, both state-owned and foreign joint-ventures. In 2008, when the market was still in its relative infancy, Chinese buyers purchased 9.4 million cars. By 2015, they bought 24.6 million.

And as the industry rapidly expands, Western carmakers, from the United States’ “big three” to German luxury brands to other imports, have rushed to gobble up market share, in the process flooding China and its comparably fledgling car companies with new vehicle models.

The best way Chinese manufacturers could compete was “shanzhai,” reverse engineering foreign products as a way to enter the market without overwhelming research expenditures.

“In the automotive industry, you can copy the look of the the vehicle, but the skills required for the highly complex integrated systems, if you’re a Chinese company, you don’t have engineers with long career histories with that capability,” said Bill Russo, managing director of Shanghai-based Gao Feng Advisory Company.

“So you shorten the life cycle by purchasing or licensing or reverse engineering. And this is not a Chinese-invented cycle.”

Imitation, as the idiom goes, is the sincerest form of flattery. But it’s also a great way to make money, something merchants have realized for hundreds of years.

The United States in the 1800s, for example, lacked authors who could stack up against British literary giants, so American publishers reprinted British works without paying heed to copyright laws, said Mark Bartholomew, a professor of law at the University at Buffalo.

Benjamin Franklin, the Benjamin Franklin, even published pirated works. William Wordsworth and Charles Dickens came to America to complain about it. The United States only stiffened its intellectual property laws once its industries, both mechanical and intellectual, matured by the end of the century.

“It boils down to economics,” Bartholomew said. “The Chinese economy doesn’t have this same tradition of the manufacturers like Ford or Hyundai or any of the folks who are making these cars. So if you don’t have these copyright laws, why pay if you can get away with it?”

China does have intellectual property laws, though, and it’s a signatory to international intellectual property agreements. But China’s laws are applied inconsistently, and even the international rules aren’t always enforced in China and elsewhere around the world.

Some countries recognize certain kind of intellectual property, but not others. For example, special door handles on a car: Are those a decorative creative works, or do they have some functionality? Creative works get copyrights. Objects with usefulness get patents. And states, not companies, are the arbiters of what objects get what protection.

It leaves multinational companies rushing to strategically secure their rights all over the world. In large established markets like the United States and Europe, car companies apply for protection right away. But in a developing market such as China — its auto market was until recently considered “developing” — those applications only became priorities over the last decade.

Smaller Chinese companies without strong market presence used past administrative delays as windows of opportunity. If intellectual property protection hadn’t been filed domestically, it was convenient to reverse engineer the product. And if the protection was filed sloppily, companies reverse engineered cars largely without the risk of prosecution.

Even when U.S. auto makers file their paperwork in the right way, China car companies enjoy remarkable home field advantage in their courts. More mature courts in Beijing or Shanghai might have judges more willing to hear out foreign companies, but rural courts or those in factory-heavy districts often show interest to local industry, including counterfeiters.

And so the copycats started coming. Honda fought a Chinese carmaker for 12 years for copying the CR-V. The Chery QQ riffed off the Chevrolet Spark in 2005. Shuanghuan’s CEO SUV model copied BMW’s X5 in 2007. Shuanghuan’s Noble copied Mercedes Benz’s Smartcar in 2009. The Lifan 320 copied the Mini Cooper Countryman in 2012.

Hummers and Porsches and Rolls Royces have been copied. Even Ferraris have been copied, and were shipped to Spain where they were seized by police.

“Anything known to mankind can be faked, even a Ferrari,” said said Frederick Mostert, past president of the International Trademark Association and a research fellow at University of Oxford and Peking University. To prove a point, he bought one and traveled with it and shows pictures of it at speaking engagements.

Ferraris, though, aren’t the counterfeits major car companies worry about. Any buyer looking for a luxury car is in the market to spend luxury car kind of money. That’s especially true in China, where consumers are extremely brand conscious, experts say. Nobody who wants a Land Rover is going to be fooled by a Landwind.

“People who buy [the Landwind] can’t afford the Land Rover,” said Russo, the Geo Feng consultant. “And of course if you’re the company that’s out there, you’re going to be pissed off about it, but nobody is getting confused.

“Get in that Landwind and drive it. I’ve driven many, many cars in China. It’s not the same car.”

As much as the counterfeits are inconveniences, it may be the lawsuits to stop the practice that may hurt Western automakers moreauto industry experts say. The Chinese public doesn’t like to see its industries get bullied. Plus, if one copycat company gets shut down, others pop back up. Western companies end up playing legal whack-a-mole with money they could use to make newer, better cars, said Kenneth D. Crews, a Los Angeles-based attorney and adjunct professor of law at Columbia University.

That kind of strategy actually trains customers to look for newer models and not settle on older ones that are more easily counterfeited. More mature Chinese car companies have grown up and away from copying other models. Once they made enough money to invest in research and original design, they did.

“These companies have grown to become more than just copycats,” Russo said. “They’re advanced and they’re innovative.”

Click here to read this article at washingtonpost.com

Bill Russo to Deliver Keynote Speech at Electric & Hybrid Vehicle Technology Conference

Novi, Michigan, September 13-15, 2016

TBS&EVT 2016 overview.pdf (page 1 of 3) Preview, Today at 3.32.03 PM

Bill Russo will be a keynote speaker at the plenary session of the Electric & Hybrid Vehicle Technology Expo (Day 1, Track 1) on September 13 in Novi, MI on the topic China Drives the Future of Personal Mobility.

 

China’s Path to Electrification vDraft6 Microsoft PowerPoint, Today at 3.38.27 PM

Topic Outline: 

  • China has emerged as the world’s largest automotive market since 2009 and remains the growth engine of the global automotive industry.
  • The world has entered a new era since 2008, with over half of the world population now living in cities, and this increasingly urbanized world challenges the established set of paradigms for personal and commercial transportation, especially in the densely populated urban centers in China.
  • The unique context of China’s urban transportation challenge, the high rate of adoption of mobile device connectivity, combined with the rapid and aggressive introduction of alternative mobility and ownership concepts will compress the time needed to commercialize new and innovative solutions and business models for personal urban  mobility
  • Shaped by several forces, China is already the largest EV market in the world and will continue to grow exponentially.  Several scenarios will be described that are shaping the market dynamicsgovernment policies, and competitive landscape.

Click here to view the conference flyer:  TBS&EVT 2016 overview

Click here to view the Day 1, Track 1 Agenda

Autoline: “Analyzing the Chinese Auto Market”

Autoline TV

Internet Premiere:  Thursday, 6/23 @ 4:00pm ET
Detroit Public TV air date:  Sunday, 6/26 @ 10:30am ET

Michael J. Dunne of Dunne Automotive, James Chao of IHS Automotive Asia-Pacific & Bill Russo from Gao Feng Advisory Company, join John McElroy on the floor of the Beijing Auto Show to discuss the, up to now, booming Chinese automotive market and where it goes from here.

Volvo: Remaking the marque

The Financial Times, June 19, 2016

Under Geely, the carmaker is back in profit and selling well in China. But is it big enough to compete with its rivals?

There is nothing exceptional about the shiny grey chassis on display in western Sweden. Its wheels, suspension and engine are all where you would expect to find them. But it stands out because of what it represents: tangible evidence of progress in one of the most daring industrial stories of recent years.

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Known as compact modular architecture, it is a shared platform destined to underpin the small vehicles made by both Volvo Cars, the Swedish premium manufacturer, and its owner Geely, the Chinese mass-market brand. “This is a bridge between the two companies,” says Mats Fagerhag, head of the joint venture that created the platform. “Everything is nice words before you start a common project and face hard facts.”

Click here to read the full article at FT.com

Bill Russo’s quote:

“The most important thing [Geely] has done is to help Volvo become a China-centric company,” says Bill Russo, a Shanghai-based consultant. “Geely has shifted Volvo from being a marginally global company situated in Scandinavia to being a global one centred in China.”

SAIC, Alibaba to Mark Chinese Foray Into Connected Cars

Bloomberg News, June 1, 2016

20150729 GM Corporate Development Leadership vF w-Appendix Microsoft PowerPoint, Today at 12.15.21 PM

SAIC Motor Corp. is putting finishing touches to a sport utility vehicle that features software developed with Alibaba Group Holding Ltd., marking the first foray into the connected-car business by two of China’s biggest companies.

The model will be available from September and be the first of a new category of vehicles for the automaker that’s fully integrated to the internet, according to Gu Feng, SAIC’s financial controller. Among its functions, the Roewe RX5 SUV will be able to suggest alternative routes with road closures or traffic congestion, provide directions to the nearest gas station when fuel is running low, and deliver music to one’s tastes, the company said.

“Connected cars are the inevitable trend of the auto industry,” Gu said in a phone interview, declining to give a price for the new model. “We worked with Alibaba instead of Google or Apple because the latter looks at the car as a piece of hardware to install their software. If they are successful, in future they may just get a Ford or GM to produce cars for them, so we don’t see as much synergy in working with them.”

The connected car is the latest battleground for automakers and technology companies such as Google Inc. and Apple Inc. for digital revenue and control of the vehicle dashboard. Customer spending on such technologies will reach an estimated 40.3 billion euros ($45 billion) this year, with safety and autonomous driving functions the biggest categories, according to a study by Strategy&, a consulting group of PwC.

In choosing Alibaba’s Yun OS, SAIC is promoting a Chinese alternative to connectivity systems offered by Google’s Android Auto and Apple’s CarPlay. While Hyundai Motor Co. introduced Android Auto to its Sonata sedan last year and will roll it out to other models, Toyota Motor Corp. is involved in the open platform SmartDeviceLink championed by Ford Motor Co. and another initiative called MirrorLink.

“SAIC and Alibaba hope to grow the pie with services and even if they share it, it’s a bigger pie for both,” said Bill Russo, Shanghai-based managing director at Gao Feng Advisory Co. “The car is becoming the third space, after home and office, where people expect to be connected to the internet — and an increasing number of such collaborations are happening among traditional automakers and internet technology companies.”

Alibaba said it didn’t have additional comments on the collaboration with SAIC Motor.

Among its other plans, SAIC Motor is considering:

  • Listing some of the company’s units, such as its Chexiang.com platform, overseas with Hong Kong as the preferred market
  • Starting a second venture fund in Silicon Valley after investing the first $100 million on projects such as new-energy vehicles and electronic commerce
  • Building cars in India, possibly through acquiring existing plants
  • Selling left-hand drive cars to other European markets besides the U.K.
  • Building up its Hong Kong asset management unit over the next three to five years and issuing bonds

SAIC, which has manufacturing joint ventures with GM and Volkswagen AG, is seeking to boost deliveries of its own Roewe and MG brands and expand overseas even as it navigates the trend toward autonomous driving. The company’s sales have risen sevenfold in a decade to 5.9 million vehicles last year.

“The automobile is about to change fundamentally and it could run without an engine, gearbox, even a driver,” said Gu. “This is the most challenging moment for me and I feel the pressure every single day.”

Click here to read this story at bloomberg.com