Baidu announced Monday that it will partner with automaker Geely to manufacture smart electric vehicles for the Chinese market, expanding from autonomous-driving software to making the cars themselves. 

Why it matters: Baidu’s partnership with Geely will deepen the company’s foray into the trillion-dollar EV industry. With internet giants domestic and abroad scrambling for a piece of the burgeoning market, Baidu will be the first Chinese tech giant to manufacture EVs itself rather than merely investing in existing companies—unlike peers such as Meituan, Tencent, and

Details: Baidu will provide key autonomous-driving technologies and software while Geely will contribute its expertise in automobile manufacturing. The search giant will hold the controlling share of the joint venture and Geely is currently its sole partner.

  • The new company, which will operate as an independent subsidiary of Baidu, will oversee the entire industrial chain, from vehicle design to research and development, as well as manufacturing, sales, and service.
  • Baidu will support the company’s strategic development with its full portfolio of core technologies, including the Apollo autonomous driving unit, DuerOS for Apollo, and Baidu Maps.
  • The partnership will leverage Geely’s Sustainable Experience Architecture, an EV manufacturing platform the company spent four years and RMB 1.8 billion perfecting. The platform is compatible with automobiles of all sizes and models, according to the company. 
  • Earlier rumors of Baidu’s strategic partnership with a Chinese automaker had already sparked investor interest. Baidu’s share prices jumped 67% in the past month and market value reached $800 million. Share prices for Geely also rose more than 20% on Jan. 8. 
  • “At Baidu, we have long believed in the future of intelligent driving and have over the past decade invested heavily in AI to build a portfolio of world-class self-driving services,” said Robin Li, co-founder and CEO of Baidu. “China has become the world’s largest market for EVs, and we are seeing EV consumers demanding next generation vehicles to be more intelligent.” 
  • Xpeng’s CEO Xiaopeng He said on Weibo that to his knowledge, more tech companies will join the race and begin making cars themselves this year. 

READ MORE: Baidu’s AI bet is more than it can afford

Context: Baidu kicked off its autonomous driving project in 2013 but it wasn’t until 2017 that it became a strategic focus for the company, which has seen its search ad revenues decline from competition from short video platforms.

  • In 2017, the search giant established autonomous driving unit Apollo. It operates Go Robotaxi, its autonomous taxi service launched in August, in Beijing, Changsha in central Hunan province, and Cangzhou in northern Hebei province. 
  • The tech giant’s entry into the EV market could help drive adoption of its existing smart driving products and services. The vehicles close the company’s autonomous-driving ecosystem, implementing the data and information about consumer behavior and trends that Baidu has aggregated through its software and services. 
  • Such partnerships won’t become mainstream, according to Cui Dongshu, secretary general of China’s Passenger Car Association. Manufacturing capacity and technology remain the core, strategic partnerships between internet giants and automakers alone can’t hit the bull’s-eye, he added.
  • Baidu has made a number of missteps in new technology vehicles over the past years, missing out on investing in NIO, Xpeng, and Li Auto.

With contributions from Jill Shen.

Yue Sun is a Beijing-based journalist covering Chinese tech giants, e-commerce trends, online culture, and other cool things about China. She holds a Master's in Journalism from Indiana University and...