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Baidu Makes A Bigger Splash, to Release a Self-Driving Bus

Zacks Equity Research
Updated
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Chinese tech heavyweight Baidu Inc. BIDU is ramping up its efforts in the self-driving vehicle space. The company has announced its plans to release a fully self-driving bus in China next year.

The announcement is definitely aimed at strengthening its presence in the areas of automated driving, connected cars and smart mobility by leveraging each other’s technological expertise, predominantly artificial intelligence (AI).

More on the Headlines

It’s not surprising that Baidu wants to make a bigger splash in the self-driving space and partnering with a Chinese bus maker should speed up its efforts.

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Though much details have not been disclosed, the company now aims to complete a fully self-driving bus -- running on a designated route - with a Chinese bus maker by next year using its open-source autonomous-vehicle software called Apollo.

What is Apollo?

Baidu’sopen platform for automated driving is named Apollo. It has been gaining a lot of momentum. Its Apollo autonomous driving program has partnered with many big companies to help combine competencies of technology companies and traditional auto suppliers. Some of these include Chinese auto companies Chery, Changan, Great Wall Motors as well as Bosch, Continental, Nvidia NVDA, Microsoft Cloud, Velodyne, TomTom, UCAR and Grab Taxi.

The company announced the Apollo open platform concept to help create a massive, overarching, safe and dependable group dedicated to effectively bringing self-driving vehicle technology to the world.

It remains confident about its open-source software and believes that it would be more appealing to car makers than Alphabet’s GOOGL Waymo self-driving technology.

Baidu’s chairman and CEO, Robin Li, recently said that Baidu has teamed with Chinese car maker, BAIC Motor Corp., to mass produce partially autonomous cars running on Apollo  program by 2019 and fully autonomous cars by 2021.

Baidu Continues to be a Leader

Baidu is considered a pioneer of AI techniques along with Tencent and Alibaba BABA. Notably, per Forbes, China-based companies absorbed more than 17% of all AI investments, second to the U.S.-based companies’ 66% in 2016.

The company has been spending heavily on AI-related research and development. Reportedly, it spends $1.5 billion on research and development every year, or roughly 15% of its revenues on AI.

The company’s focus on using AI techniques — machine learning, deep learning and natural language processing — has helped it to provide more useful and personalized search results. The company is also using neural networks to effectively target online advertisements.

According to the National Development and Reform Commission statement (May 2016), China will increase investments on developing the AI sector and plans to create a market worth more than 100 billion yuan (US $15.26 billion) over the next three years. The program will involve key projects such as intelligent home appliances, smart automobiles, intelligent unmanned systems, intelligent wearable devices and robots.

We believe that higher spending on AI, especially in the massive Chinese market, will be favorable for Baidu.

Wrapping Up

There is no doubt that the autonomous driving space will see more innovation over the next few years, both by technology companies and automakers, including smaller startups. In fact, CB Insights estimates that financing in the auto tech startup sector exceeded $1 billion in 2016 and more investments will surely follow. This is one of the best places to be in because the technology is being developed. Also, early investors can sell their interest at a nice premium.

But this market will be marked by significant regulatory control, stiff competition and a tussle over who controls the data generated. It's unlikely to have a clear winner.

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