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BAT are racing with new energy vehicles at the end of 2017

The last month in 2017 witnessed a new upsurge of electric vehicles in China, and the pushing hands are from Chinese major internet players, Baidu, Alibaba and Tencent, or BAT as they are collectively known.

On Dec 11, WM Motor held a ceremony to reveal the first car under the new Weltmeister brand, the EX5; and on Dec 16, NIO, formerly known as NextEV, launched its first SUV NIO ES8. Among the leading investors to the two “China’s answers to Tesla” are Tencent and Baidu.

Those two Chinese internet-based companies’ investment in the couple of new energy vehicles can be traced back three years ago.

In 2014, a group of deep-pocketed China-based internet entrepreneurs and financial investors, including Tencent, supported an effort to create NIO. Tencent led the EV’s first funding round valued at about USD 500 million in 2015, while Tencent and Baidu led the USD 600 million funding round in March. One month before the launch of ES8, NIO received a USD1 billion in funding, which led by Tencent.

NIO’s rival Weltmeister received investment from these two tech giants too. In early December, Weltmeister said that it has secured USD 1 billion from a group of investors led by Baidu, mounting the total fundraising since its conception to RMB 12 billion (USD 1.83 billion) . On December 22, the startup further announced an undisclosed funding round backed by investors including Tencent.

Following Tencent and Baidu, Alibaba also made heavy investment in the EV industry in December. The E-commerce giant, on December 12, announced its investment in XPENG Motors, a new energy vehicle startup, as its recent piece of strategic investments among Alibaba’s overall auto strategy.

Following its investment, Alibaba would have an approximately 10% stake in XPENG Motors. And more importantly, electric vehicle industry becomes the new battle zone for the BAT.

NIO ES8 SUV. Photo from NIO

The reason behind the EV fad

In 2017, the new energy vehicle industry in China received more than RMB 22.6 billion  from investors including all China’s three biggest internet companies, which indicates the new trend of Chinese internet firms zooming into electric vehicle market.

There are three major reasons for those new riches into the new energy vehicle market. First, the strong and fast developed market demand in China. With the growth of China’s middle class, the level of consumption also improved. Vehicles have become the necessity of life for many families.

Second, new energy vehicles, like electric vehicles, have been strongly promoted by Chinese government, as a fight against challenge from air pollution and environment protection. From production to consumption, Chinese government has offered many preferential taxes and subsidiaries. For instance, Chinese new energy automakers, which are identified as high-tech enterprises, can enjoy the low rate of business income tax, which is only 15%of the standard tax rate. China’s government will continue to exempt the 10% purchase tax on new-energy vehicles at least through 2020, according to media report.

Last but not the least, the smart car system and autopilot technology are the core features those technology companies’ targets in the vehicle industry. However, after trying to cooperate with traditional automakers, those technology companies believes investing their own new energy vehicles may help to realize their goals, even faster.

For instance, Baidu once teamed up with three top automakers Audi, Hyundai and Shanghai General Motors in manufacturing cars equipped with internet access and in-vehicle infotainment services—CarLife, which included a range of Baidu services, incorporate free navigation and support third-party apps. But with the CarLife system, Baidu can only be a car tech supplier.

Later on, Baidu invested heavily in artificial intelligence, and launched its Project Apollo, a self-driving vehicle platform in a bid to help drive the development of autonomous cars. Baidu has initiated cooperation with more than a dozen of established car manufacturers to build self-driving cars. However, through investing in new energy vehicles, their technology bound can help Baidu better carry on its Project Apollo.

Lu Qi, Baidu COO, said the “All in AI” strategy emphasize to productize and commercialize its AI technology, and Weltmeister pays great attention to turn AI technology into affordable users’ experience, which is a great match with Baidu.

(Top photo from Weltmeister)

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