In a press release on Monday, Baidu ( BIDU -0.67% ) confirmed that it was entering the red-hot electric-vehicle (EV) market. The company plans to set up an independent subsidiary company to make smart EVs, partnering with privately held Chinese auto maker Zhejiang Geely Holding Group, which will also be a strategic investor in the new venture.
This confirms rumors circulating since mid-December that Baidu had held talks with numerous Chinese automakers regarding a collaboration, including Zhejiang Geely Holding Group, Guangzhou Automobile, and China FAW Group.
Baidu is widely considered to be the leader in self-driving car technology and artificial intelligence in China, and the new company will leverage Baidu's expertise to develop intelligent driving systems, while relying on Zhejiang Geely Holding Group for its manufacturing capabilities. Baidu also said it will support the venture "with its full portfolio of core technologies, including Apollo autonomous driving, [its voice recognition system] DuerOS for Apollo, and Baidu Maps."
As China's search leader, Baidu has taken cues from Alphabet ( GOOGL -0.60% ) ( GOOG -0.58% ), which leveraged its own artificial intelligence and autonomous driving capabilities to form the self-driving car company Waymo. Baidu's Apollo is one of the leading self-driving systems in China, so this collaboration seems like a next logical step.
The success of innovators like Tesla ( TSLA -4.35% ) and NIO ( NIO -2.10% ) in the EV market over the past several years has attracted a large and growing cadre of competitors from both well-established automakers and start-ups joining the fray.
The global EV market, which was estimated at roughly $162 billion in 2019, is expected to top $802 billion by 2027, according to Allied Market Research. This would result in nearly 27 million electric vehicles, an eightfold increase from 2019, according to research company Markets and Markets.
Shares of Baidu have soared 38% in the four weeks since these rumors first surfaced.