Amid the rush to build electric vehicles, Alibaba is learned to be joining Xiaomi, Huawei and Baidu. It has lately entered into a joint venture with IM Motors and toÂ produce the luxury sedan IM L7.
Deliveries of the L7 will begin shortly and be priced at 408,800 yuan and above. This means the car will be cheaper than the luxury sedan Model S produced by Tesla. However, it will be slightly more expensive than the Model 3.
The higher-end of L7 will be a twin motor version and equipped with a 237-horsepower engine. It can cover a distance of 615 kilometers on one charge. It will have the technology of driving semi-autonomously on city roads, part without help and drive full-autonomously on highways.
Alibaba is the largest e-commerce company in China and its EV venture may have surprised investors. However, it is not the first tech giant in China to step into the EV market. Baidu has come up with its own version of EVs partnered with Chery automaker in the country. Huawei is in talks with a couple of Chinese automakers for the same and Xiaomi lately earmarked $10 billion for an expansion into the EV market with the help of a new subsidiary.
The EV market in China now seems crowded and it is yet to be understood whether the entry of Alibaba really makes any sense to the investors.
In fact, Alibaba eyed the EV market first in 2016 when it started the development of smart cars by partnering with SAIC. It tested its Linux-based OS for IoT devices and vehicles. Four years later the company partnered with IM Motors with SAIC, which owns 54 percent of shares in the deal while Alibaba holds 18 percent and Zhangjiang Hi-Tech holds 18 percent.
Alibaba mainly generates revenue from its e-commerce marketplaces, Cainiao logistics network and brick-and-mortar stores. Its digital media, cloud and a couple of more such divisions are still unprofitable. Hence, the stake in IM Motors is just a small part of its entire portfolio.
Hence, it can be said that there is no reason for investors to worry. The IM Motors should not be considered a red flag as the JV is mainly controlled by SAIC. It is not producing the vehicles on its own. It is also not crushing its own margins. If the L7 sells well, it can help in the expansion of its digital ecosystem. Investors interested in diving into the EV markets should catch up with the Baidu, Huawei and Xiaomi stocks.