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Why Would Alibaba Invest in Self-Driving Technology?

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8.0 million self-driving vehicles on Chinese roads by 2030

Alibaba (BABA) could be drawn into the business of developing self-driving vehicles for several reasons, one of them being rosy projections for the self-driving market—particularly in its domestic market, China. According to China Daily, citing data compiled by McKinsey, China is poised to be the world’s largest market for driverless vehicles in the next decade. McKinsey predicts that sales of self-driving vehicles and smart mobility services will exceed $500 billion in China by 2030. It also predicts there will be 8.0 million self-driving vehicles on Chinese roads by 2030, and 13.5 million vehicles by 2040.

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98% of Chinese interested in self-driving vehicles

Additionally, the report said interest in self-driving vehicles in China is stronger than in any other major world economy, with 98% of Chinese interested in self-driving cars—they would be willing to pay a $4,600 premium to own one. In contrast, 70% Americans are interested in self-driving cars, and they would pay a $3,900 premium to purchase a self-driving car.

Driverless taxi business

The smart mobility service market could be a better bet for Alibaba. China’s market for autonomous driving-based services is projected to be ~$260 billion by 2030. Alibaba, for example, could venture into providing taxi services using driverless vehicles, a service that Alphabet’s (GOOGL) Waymo is gearing up to launch in the United States. Softbank-backed (SFTBF) Uber, Ford (F), and General Motors (GM) are also interested in venturing into the driverless taxi business. Autonomous driving, particularly the area of driverless taxis, could also expand the market for Alibaba’s mobile payment service, Alipay.

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