Shares of Baidu rose nearly 14% on Tuesday on the news that the Chinese search engine company is planning to build its own electric vehicles.
Why it matters: The search engine leader’s interest in jumping into EV manufacturing is the latest sign that investment in the sector is picking up tempo, as Chinese tech companies are seeking to get in on enthusiasm for EVs amid a sales rebound in their home market.
- Baidu is not the only tech giant buying in to the sector. Alibaba has partnered with China’s biggest automaker SAIC and a Shanghai government-backed entity in an RMB 7.2 billion ($1.1 billion) project to develop premium EVs, according to an announcement released Nov. 27 (in Chinese).
Details: Baidu has been in discussion with car companies including China’s biggest private automaker Geely, Toyota manufacturing partner GAC, and the state-owned FAW Group for a possible majority-owned venture to build EVs, according to a Reuters report.
- A Baidu spokesperson responded that it has no comment on market rumors. GAC said it recently signed a framework agreement with Baidu, but has no further details regarding the partnership. The two companies last Tuesday announced a collaboration to jointly develop self-driving and connected vehicles.
- A Geely spokesman said it was “not familiar with the matter.” Baidu is also deepening its alliance with Geely, in October leading the RMB 1.3 billion Series A in Ecarx, a Geely-backed in-car software company. Geely’s infotainment system has been enabled with Baidu’s voice recognition technology and embedded with Baidu’s mobile apps since late 2019.
- “It wouldn’t be a wise move if Baidu decides to build its own EVs,” said industry watcher Yu Linglin, a former reporter at Chinese financial media 21st Century Business Herald (our translation). The tech company would have to put large amounts of capital into the business, but is not likely to get signs of commitment such as exclusivity or cownership of each other’s stocks in return, Yu added.
Context: Chinese tech giants have backed leading young EV makers aiming for control over the companies and a foothold in the booming segment, and are doubling down as the country’s EV sales started to recover since March.
- Baidu has been a major backer of Shanghai-based EV startup WM Motor since late 2017, and led its RMB 3 billion Series C two years later. WM Motor in September secured another RMB 10 billion war chest mainly from a group of capital funds backed by the Shanghai local government.
- Alibaba is the biggest external shareholder in EV maker Xpeng, while food delivery platform Meituan and its founder Wang Xing are the largest shareholders in Li Auto after founder Li Xiang.
- Baidu is also accelerating efforts to get its voice-enabled operating system and content offerings into vehicles’ dashboards amid a rising user demand for in-car information and entertainment services. Progress has been slower than expected, as leading carmakers are reluctant to cede over their control to tech giants.