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Baidu Tries to Shift Out of Reverse

By Rick Munarriz - Jan 8, 2016 at 11:04AM

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China's leading search engine makes a bigger play for telematics.

Image source: Baidu. 

The market in general and the Chinese stock market in particular have been brutal over the past few days, and now Baidu (BIDU -0.96%) wants to take the wheel. China's leading search engine announced that it's expanding its reach of Baidu CarLife, a telematics solution for connected cars.

The smartphone integration solution will now be available on many future models of Audi, Cadillac, and FAW-VW vehicles sold in China. Drivers with iOS and Android devices will be able to tap into voice-based navigation, music streaming, and third-party apps along with access to their phone's calling and texting features.

Baidu began betting on a car-fueled future three years ago when it threw its hat into telematics. That resulted in last year's introduction of Baidu CarLife. It added several major automotive companies last year, and now its dance card is filling up with even more industry heavyweights.

It makes perfect sense for Baidu to be a leader in connected cars. It's the undisputed leader in China's search engine market, and that kind of consumer access has its benefits beyond the query bar. Baidu Maps has more than 70% of the Chinese market, topping 300 million monthly active users. It serves up an average of more than 23 billion positioning requests a day.

This is a market that's clearly going to grow as auto ownership expands. In fact, just a third of Baidu Maps users are actual car owners. China's economic growth has slowed in recent years, but car ownership rates in the world's most populous nation will continue to improve. 

Like many of the tech darling's recent bets, Baidu CarLife won't pay off right away. It wants to get into your car. It will figure out how to get into your pocket later. Baidu is making no bones about wanting more than just your attention as it serves up directions, streams, and apps. This morning's press release singles out its plans to dive into derivative auto-based services including insurance, car repairs, and gasoline refills.

It's ambitious, but that's been the story at Baidu all along. 

Mr. Market isn't playing along. Shares of Baidu have bounced back in a major way since bottoming out this past summer, but the stock has taken a beating alongside most Chinese equities. Shares of Baidu have declined in nine of the past 11 days. Yesterday's 6% plunge will stand out, but that's just half of the stock's 12% slide over the past 11 trading days. Its fortunes may not shift out of reverse until the interest for Chinese growth stocks follows suit, but at least Baidu is making the most of the lull by making itself that much more attractive when market sentiment comes around. 

Rick Munarriz has no position in any stocks mentioned. The Motley Fool owns shares of and recommends Baidu. Try any of our Foolish newsletter services free for 30 days. 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.

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