Alibaba joint venture with Tencent enters the Chinese market

This is an excerpt from a story delivered exclusively to Business Insider Intelligence Transportation & Logistics Briefing subscribers. To receive all the history as well as other information each morning, click here.

According to Reuters, Alibaba, WeChat's parent company, Tencent, and a handful of automakers have formed a joint venture that will offer mobile phone services in China.

Reuters

Companies will pay $ 1.5 billion into the newly formed company but did not reveal when they planned to officially start offering mobile services.

The joint venture is the third new entrant to the colossal market of horse riding in recent months. In February, a start-up supported by Ant Financial – the financial services division of Alibaba – launched a carpool service similar to Uber Pool. In the fall, BMW was licensed to operate a ridesharing service in a city in southwestern China. This trio of new entrants is seeking to conquer a huge market: Bain & Co. estimates that the Chinese horse advertising market represents $ 23 billion, making it the largest market in the world. The giant Didi Chuxing, which accounts for 90% of China's bookings, currently dominates the landscape, but new entrants have reason to believe that China's running market still has significant potential.

Here's what makes China an attractive market for mobile phone companies:

• China needs new ways to navigate its rapidly urbanizing landscape, but its transit infrastructure is not keeping pace. In recent decades, the population of Chinese cities has exploded. The Chinese government first responded by injecting hundreds of billions of dollars into subways, railway lines and other public transportation systems. But more recently, its priorities have changed: the government now wants to slow down public transit investments to reduce budget deficits. Without purpose for urbanization, consumers need more mobility options in the absence of improved public transportation. Arriving by car is well suited to meet this demand.
• Many Chinese cities are dense and difficult to navigate, which can make it difficult to own a private car. In Shanghai, for example, 26 million people live in a radius of 13 km 2, making it one of the densest cities in the world. In comparison, the city of New York has about 8.6 million people in a radius of 302 km². In environments where space is scarce, finding and paying for parking – as well as the headache of navigating congested streets – makes the drive an attractive opportunity to take up the habit of owning a car.
• The already mbadive Chinese market for running still has potential for growth. A survey conducted by Deloitte Insights earlier this year found that more than two-thirds (69%) of Chinese consumers rarely used mobile phone services, while 17% never used mobile phones. This shows that there is still a large number of Chinese consumers for the first time among which mobile phone service providers to operate, and much more likely to become more regular users.