Alibaba teams up with BMW dealership on O2O venture

Alliance with Hong Kong-listed China Greenland Rundong Auto will offer mainland sales and financing service for luxury cars

PUBLISHED : Tuesday, 17 November, 2015, 6:45pm
UPDATED : Friday, 20 November, 2015, 3:32pm

E-commerce powerhouse Alibaba is teaming up with Hong Kong-listed China Greenland Rundong Auto to develop an online-to-offline (O2O) sales and financing service for the mainland’s growing luxury car market.

Shanghai-based Greenland Rundong, one of the largest BMW car dealers in China, said in a regulatory filing late on Monday that it had entered into a strategic cooperation deal with the Alibaba Automobile business unit of Zhejiang Technology, which is part of the larger Alibaba organisation.

“Greenland Rundong and Alibaba Automobile will build up an O2O automobile service ecosphere, with the Yangtze River Delta as its core location of business,” Yang Peng, the chairman and president of Greenland Rundong, said.

Yang said he expected the partnership would help Greenland Rundong integrate its traditional sales and after-sales business with “a high-quality online car purchase and maintenance service experience to consumers”.

O2O centres on connecting people with local services. This includes bringing customers to retail outlets
Tsang Chi and Alice Cai, HSBC

Their alliance marks the latest in a series of O2O initiatives being undertaken by China‘s major internet companies, led by Alibaba, Tencent and online search giant Baidu.

“O2O centres on connecting people with local services. This includes bringing customers to retail outlets,” Tsang Chi, HSBC’s head of Asia-Pacific internet research, and associate analyst Alice Cai said in a report.

They said internet companies served as “a gateway for discovery” in O2O initiatives, “closing the loop from query to fulfilment”.

The estimated total addressable market for O2O services on the mainland is 10 trillion yuan (HK$12.17 trillion), based on a penetration of less than 5 per cent across the mainland.

“The market is to double in four to five years,” the HSBC analysts said.

Alibaba Automobile and Greenland Rundong’s O2O venture will see them jointly organise campaigns for premium car sales, set up an “instant” car financing scheme and establish a brick-and-mortar Rundong Auto luxury flagship store.

Those activities will be supported by Greenland Rundong’s portfolio of seven luxury car brands, which include BMW, Mini, Land Rover, Jaguar, Audi, Lexus and Cadillac. It also sells Italian ultra-luxury brands Ferrari and Maserati.

As of June 30, Greenland Rundong operated about 73 stores in eastern China.

The O2O venture with Alibaba follows the opening of Greenland Rundong’s flagship online store on Tmall, Alibaba’s business-to-consumer e-commerce platform.

On that site, Greenland Rundong also sells electric cars, pre-owned cars and so-called parallel import vehicles.

The company’s O2O effort could provide it with a much-needed boost, after it recorded a 3.3 per cent year-on-year decrease in revenue to 7.34 billion yuan in the first half of this year.

In a report, Daiwa Capital Markets analyst Kelvin Lau said a recovery in China passenger-vehicle sales “now seems more pronounced to us” , helped by the purchase tax cuts implemented by the central government at the end of September.

Data from the China Association of Automobile Manufacturers shows that mainland passenger-vehicle sales grew 17 per cent year on year to 293,666 units in the week of November 1. On a year-to-date basis, total sales advanced 4.1 per cent to 16.8 million units.