The pair will establish a joint venture and aim to launch their first car in 2016, SAIC said in a statement. The 50-50 JV will be opened to other investors in future, according to a spokeswoman for the automaker.
SAIC shares rose 9.8 percent to a more than two-month high on news of the partnership, before shedding some of the gains to close up 4.8 percent.
Chinese Internet companies and auto makers have been quick to team up to start developing partly self-driving and Internet-connected cars, following a path already trodden by U.S. tech giants Google Inc and Apple Inc.
Internet giant Baidu Inc, which leads China's search market and competes with Alibaba in some areas, is developing cars that are shifting parts of driving towards automation, working with companies like Germany's BMW AG.
In an emailed statement, Alibaba said its partnership with SAIC would include developing new technologies and services using cloud computing.
© Thomson Reuters 2015
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