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Alphabet vs. Baidu Stock: Which Is the Better Driverless Car Play?

By Chris Neiger – Jul 27, 2016 at 12:12PM

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Both of these tech giants are investing time and money into driverless technology, but one has a slight advantage over the other.

Image source: Google. 

Two of the world's biggest technology companies, Alphabet (GOOG -0.95%) (GOOGL -0.96%) and China-based Baidu (BIDU 2.74%) have both committed years of research and millions of dollars in funding to their own driverless car technologies. 

Both are betting that they can grab a slice of the growing driverless car market, which will be worth $42 billion by 2025 and comprise 10% of all vehicles sold by 2035.

Both companies are making huge strides, but only one of them is inching ahead of the other. Here's how the two companies stack up so far.

Alphabet's slow and steady approach

Alphabet is building out its driverless car plans under its Google division, which has been working on autonomous cars for years. The company's driverless vehicles have already driven 1.6 million physical miles over the past seven years, and virtual simulations in Google's data centers allow its driverless car software to log 3 million virtual miles every day

Google made one of its biggest moves in driverless cars this year when it said it would work with Fiat Chrysler on autonomous vehicles. It's the first official partnership Google's made with an automaker, and it'll bring the company's driverless car technology into 100 Chrysler Pacificas.

Google is still, of course, testing its driverless technology out on its own prototype vehicles, as well. 

Aside from its partnerships and software, the company has aggressively lobbied the U.S. government to expand federal laws to allow more driverless car testing

Baidu's aggressive driverless goals

If there was ever another tech giant to take on Alphabet in the driverless car space, it's Baidu. Just like Google, Baidu has gone before Congress to advocate for looser driverless car rules in the U.S. and is already testing its technology on American and Chinese roads.

But Baidu's driverless car plans are a tad more ambitious than Google's. The company already has driverless vans and buses driving around the Chinese city of Wuhu. It's a five-year test of the company's driverless systems in the real world.

The initial tests won't involve passengers and will be regulated to small areas around the city but will eventually encompass larger areas and include riders. That type of testing is something Google can't currently match because of U.S. laws. 

An article in The Guardian noted last year that the Chinese government has the ability to "rapidly mandate the kind of wholesale changes that would be required to unleash self-driving cars."

Baidu's main goal is to bring self-driving, mass transportation vehicles to Chinese cities by 2018. Whether it'll reach that goal or not is still unclear. But Baidu has an advantage over Google when it comes to driverless car laws: The Chinese government is much more willing to allow aggressive testing on its roads than the U.S. government is (whether that's necessarily safe or not is another thing). 

And last, but certainly not least, Baidu has a lot of driverless car patents that it could eventually license to other companies. That could eventually give Baidu the opportunity to bring in revenue from patent licensing, though the company has not yet specified how or if it will do this. 

This is a tough call

There are two things to remember here: Neither one of these companies is betting the farm on driverless car technology, and neither has clearly stated how it will make money from its technology. 

That's not to say there isn't a massive opportunity for the companies, though. Morgan Stanley's Katy Huberty estimates that the shared mobility market (people borrowing or renting drivleress cars) could be worth $2.6 trillion by 2030. And both of these companies could easily be in a position to license or sell their driverless car technology to automakers by that time -- and grab a large part of that market. 

At this point, I'd have to give the slight advantage to Baidu. The Chinese government appears to be pushing driverless car technology along faster than the U.S., and that's giving Baidu more opportunities to make self-driving vehicles a reality. 

The U.S. is expected to release more driverless vehicle standards later this month, which will give us more insight into how quickly driverless technology could spread here. But it's clear that China is already embracing self-driving technology much faster -- and Baidu is benefiting. 

Suzanne Frey, an executive at Alphabet, is a member of The Motley Fool's board of directors. Chris Neiger has no position in any stocks mentioned. The Motley Fool owns shares of and recommends Alphabet (A shares), Alphabet (C shares), and Baidu. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy.

Stocks Mentioned

Alphabet Stock Quote
$99.48 (-0.96%) $0.96
Baidu Stock Quote
$116.92 (2.74%) $3.12
Alphabet Stock Quote
$99.87 (-0.95%) $0.96
Morgan Stanley Stock Quote
Morgan Stanley
$89.81 (-2.49%) $-2.29
Fiat Chrysler Automobiles Stock Quote
Fiat Chrysler Automobiles

*Average returns of all recommendations since inception. Cost basis and return based on previous market day close.

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