Chinese internet giants are teaming up with automakers in the race toward rolling out smart, internet-connected vehicles, which are widely seen as the ultimate mobile devices to connect people with online services.

Tencent Holdings Ltd signed a deal with Guangzhou Automobile Group Co Ltd on Monday to cooperate on internet-of-vehicle services, smart driving, cloud computing and other areas.

According to a report by China Business Network, quoting an anonymous source, Guangzhou Automobile will be in charge of developing the operating system for cars, while Tencent will equip cars with applications such as music streaming.

Tencent and Guangzhou Automobile did not immediately respond to requests for comment.

The cooperation came after Alibaba Group Holding Ltd unveiled an internet-enabled vehicle last year in partnership with SAIC Motor Corp, a major car manufacturer. The car comes with Alibaba's Yun-OS operating system and retails from 148,800 yuan ($22,680).

Lu Zhenwang, CEO of Shanghai-based Wanqing Consultancy, said as car makers are increasingly intertwined with technology companies in the automobile sector, the key is who will have the final say in developing operating systems.

The operating system decides how online services are connected to vehicles. More importantly, data generated by users in cars will come out of the operating systems," Lu said.

According to Lu, car makers will not easily give up the right to develop the first-generation operating system for cars.

Neil Shah, research director at market research and consulting firm Counterpoint Technology Market Research, said internet and software giants are already providing software, maps and digital services for automobile dashboards.