China’s Baidu Teams With Geely on Electric Cars

(Bloomberg) --

Baidu Inc. and Geely Automobile Holdings Ltd. will team up to make electric vehicles for the Chinese market, a person familiar with the matter said, deepening the internet giant’s foray into automobiles as its core business slows.

Geely’s shares soared as much as 10% in Hong Kong, while Baidu gained 2% in New York. The pair may announce their new venture as early as next week, the person said, asking not to be identified talking about a private deal. China’s internet search leader picked the fast-growing carmaker after discussions with potential partners including closely held WM Motor, Guangzhou Automobile Group Co. and FAW Group, the person said. It will control the venture with a majority stake, the person added. Reuters first reported on the deal.

The tie-up marks a significant expansion into auto-making for Baidu, which has for years touted its Apollo open-sourced platform to help manufacturers build autonomous driving and connectivity into their products. The move precedes a Hong Kong share sale that’s said to be on track to raise $3.5 billion to fuel the search giant’s ambitions beyond advertising.

Baidu’s venture with Geely is intended to push Apollo’s adoption in more vehicles, the person said. It will start by building EVs for the world’s largest vehicle arena at Geely plants, though it’s unclear if the partners intend to eventually also produce self-driving cars. Representatives for the two companies declined to comment.

Read more: China’s Baidu Said to Pick CLSA, Goldman for Hong Kong Listing

What Bloomberg Intelligence Says

Baidu’s plan to make smart electric vehicles with Geely, as reported by Reuters, may boost the company’s investor appeal as it seeks a $3.5 billion secondary listing in Hong Kong during 1H. While details of the electric-vehicle project are scarce and sales may not cover costs for years, it may be a step towards monetization of Baidu’s autonomous-driving platform Apollo, which it has heavily invested in since 2015.

- Vey-Sern Ling and Tiffany Tam

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The platform, which has been described as an Android for automobiles, has about 130 members including Volkswagen AG, Ford Motor Co., BYD Co., Microsoft Corp. and Geely’s own Volvo Cars.

Baidu aims to monetize Apollo, which the company has sunk billions of dollars since 2015. While advertising remains its bread-and-butter, the company has made bets to commercialize its AI technology through self-driving cars and smart speakers. Carmakers like WM Motor and Geely already employ Baidu’s autonomous techniques, and it has won government deals to develop transport networks and test robo-taxis in cities like Guangzhou and Chongqing.

Baidu’s move underscores how global internet giants are firming up plans to get their technology in front of car buyers who increasingly prize connectivity and smart features over traditional driving mechanics. Apple Inc. is said to have created a team of engineers developing drive systems, vehicle interior and external car body designs with the goal of eventually shipping a vehicle. Alibaba Group Holding Ltd. has formed a venture with Chinese giant SAIC to explore smart vehicles.

Read more: Hyundai Is in Early Talks on Apple Tie-Up

(Updates with analyst’s comment from the fifth paragraph)