A woman walks past the gate of SAIC Motor Corp Ltd in Shanghai, Jan 26, 2013.[Photo/Agencies]

Ding Daoshi, a Beijing-based Internet expert, said that rather than building its own Internet-connected cars, what Alibaba wants most is to build up an ecosystem for the Internet of Vehicles, a market that is estimated at 10 billion yuan in 2014 in China.

"Only 7.5 percent of China's 127 million vehicles last year could be classified as Internet-connected, suggesting great potential," said Ding.

Domestic Internet companies have been teaming up with vehicle makers to develop partly self-driving and Internet-connected cars.

Robin Li, chief executive officer of Baidu Inc, said that his company is cooperating with automakers to develop smart vehicles.

Neil Flynn, portfolio manager at Alcuin Asset Management, said the key issue for technology companies investing in car technology is data.

"If Alibaba knows exactly where you go, what times you typically travel, and the music and entertainment that you use while driving, it can gain a much better understanding of your behavior," he said. "It will be able to analyze the data and not only identify common trends, but will be able to forecast the services that users would most likely need and hence boost revenue."