Ford, Alibaba Sign Letter of Intent for Three-Year Collaborative Agreement

by Ben Pena December 9, 2017, 4:47
Ford, Alibaba Sign Letter of Intent for Three-Year Collaborative Agreement

The Alibaba Group Holding Ltd (NYSE:BABA) has signed an agreement with Ford Motor Company (NYSE:F) to combine forces and jointly search for business opportunities including the cloud computing, retail, and connectivity which may include selling of Ford cars on the Alibaba's online retail podium, Tmall.

Earlier this year, Alibaba's retail arm Tmall announced the development of a auto vending machine, in which consumers can use their phone to browse through cars stored in a tall windowed building and have the vehicle brought down to street level via elevator lifts.

The deal came at the end trip by Ford Chairman Bill Ford Jr. and CEO Jim Hackett.

Mark Truby, Ford's global chief spokesman said the company is expected to make an announcement on Thursday in Hangzhou, where Alibaba is based, but declined to comment in advance. Consumers could use the vending machine with an app, choosing to either immediately buy one of the vehicles or test drive one.

In October alone, 77,000 full electric vehicles were manufactured and an equal number of them were sold, up more than 76 percent and 95 percent respectively.

Ford has put a lot of focus on China's electric vehicle market - with a local joint venture expected to lead to 15 electric or hybrid models on sale in the country by 2025 - and today the automotive giant announced a tie-in with Alibaba to fulfill its ambitious goals.

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The move, though, could be potentially problematic for dealers, some industry experts said.

Speaking to Reuters, head of Shanghai-based consultancy Automotive Foresight, Yale Zhang, said it will hurt traditional dealers.

"When online sales and direct sales volume was small that is one thing". "Retail innovation is great, but is by its nature disruptive and can't keep everyone happy".

The danger is that the dealers lose out not only on a lot of vehicle sales but also the potentially lucrative auto financing aspect of their traditional business. As of October, Ford's 2017 auto sales were down 5% from the same period in 2016.

Ford is a relatively small player in China and has been focusing on expanding into the market to better compete globally.

Ford's sales in the first 10 months of 2017 were 938,570, a decline of 5% from the same period in 2016, against a 2.2% gain to 3.13-million for rival General Motors.

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