Back to a market value of 80 billion, it's hard to realize Baidu's car-making dream.

Miaomiao's note: January 11, 2021,$Baidu (BIDU.US)$In a joint announcement with Zhejiang Geely Holding Group, the two parties stated that they have reached a strategic cooperation agreement and will formally establish an intelligent vehicle company to enter the automotive industry as a full-vehicle manufacturer.

The announcement also stated that Baidu Auto is initiated and led by Baidu, which holds a controlling stake. The company operates independently of its parent company and maintains autonomous operations. At the same time, Baidu will fully leverage its core technologies, including artificial intelligence, Apollo autonomous driving, Xiaodu In-Car, and Baidu Maps, to empower the car company and support its rapid growth.

$GEELY AUTO (00175.HK)$Geely Holding Group is currently the only investor other than Baidu. The two parties will collaborate closely in the field of intelligent vehicle manufacturing based on Geely's latest globally leading all-electric architecture—the SEA Intelligent Evolution Experience Architecture—to jointly develop the next-generation intelligent vehicles. However, the two sides have not yet released specific details regarding the company's funding, technological synergy, management team, or equity structure.

In fact, rumors that Baidu would personally enter the car manufacturing business began to spread like wildfire in late December 2020, although at that time there was no specific partner yet. During this period, the company's stock price kept rising, reaching $248.98 during trading on November 11 local time, a new high since August 2018.

Baidu doesn't make cars.

Baidu's decision to partner with Geely is undoubtedly aimed at accelerating commercialization and implementing its technologies. However, this does not mean that Baidu really intends to manufacture cars; in fact, Baidu is precisely seeking a partner because it does not want to build cars itself.

In fact, Baidu, like Alibaba and Huawei, also seems to have little interest in entering the hardware field. Judging from the content of their cooperation, Geely, as an automaker, will once again be responsible for delivering complete vehicles based on its accumulated technology. Baidu clearly has no intention of interfering in this process or "having laymen advise experts." Instead, Baidu will use Geely Auto as a platform and application scenario for its autonomous driving technology and other automotive ecosystem products developed by other companies, thereby achieving a major leap forward in commercialization and technological implementation.

In other words, Baidu will still focus on empowering the software and ecosystem levels and is unlikely to get involved in the hardware part. As for "building cars across the entire industrial chain," that should be left to Geely.

Baidu Apollo is actually not easy to sell.

According to public information, Baidu Apollo's autonomous driving is the company's earliest and most advantageous core technology, and it is also at a relatively advanced stage of development.

Since the second half of last year, Baidu's autonomous vehicles have been open for test rides in multiple cities nationwide. In December, Apollo Intelligent Driving unveiled ANP (Apollo Navigation Pilot), a high-level intelligent driving solution—commonly referred to in the industry as navigation-assisted driving. ANP is based on Apollo Lite, currently the only L4-level pure-vision autonomous driving technology in the country, and represents the application of L4 (where all driving operations are performed by an autonomous system within designated roads and environments, known as highly automated driving) autonomous driving technology in the field of assisted driving.

It sounds very powerful, but the key question is: is Baidu Apollo really that easy to sell?

I'm afraid not.

As an open software platform, Baidu's autonomous driving system can theoretically be installed on vehicles of any brand. If every new-energy vehicle company is highly willing to install it, why bother establishing a deep partnership with just one company? Baidu has indeed collaborated with industry leaders such as BYD, but the outcomes were ultimately unsatisfactory.

At present, Baidu's products still have shortcomings in terms of market appeal. This could be due to the products themselves or insufficient market demand. However, it is clear that the company has encountered significant challenges in the commercialization process, which has forced Baidu to choose a specific automaker for in-depth cooperation, thereby ensuring at least the implementation of its technology.

Stock Prices: A Temporary Rally

Baidu has indeed not been doing well in recent years, with its stock price falling steadily. The company really needs a way to restore its valuation, and announcing its deep involvement in the car-making business is obviously a very bold move.

As we can see from the stock price trend, since rumors of car manufacturing emerged last December, Baidu's stock price has been rising steadily, and its market value has also returned to the level of August 2018. However, this may be as far as it goes.

Baidu’s car-making venture is, at the end of the day, just a story—perhaps hot money loves it, but Wall Street doesn’t. After all, Baidu is no longer a billion-dollar venture; it long ago passed the stage where it could stir up the capital markets simply by dishing out empty promises. Today, investors want to see concrete results: revenue and growth that are reflected on paper.

However, the story of car manufacturing cannot bring these benefits. It may to some extent restore Baidu's declining valuation, but it is unlikely to become a long-term positive factor.

Rome wasn't built in a day, and neither will self-driving cars be on the road anytime soon.

Although the market is very optimistic about Baidu's entry into car manufacturing, we should not overlook the fact that autonomous driving is indeed a trend, and Baidu’s R&D progress is relatively advanced. However, it will take time before these can be truly commercialized and provide support in return.

In fact, Baidu has been involved in the field of autonomous driving for quite some time, even dating back to 2013. It has achieved good results in areas such as artificial intelligence, Apollo autonomous driving, DuerOS In-Car, and Baidu Maps. However, the key issue is that none of these initiatives have ultimately been successfully implemented.

With these technologies in hand, Baidu has actually "teased" quite a few automakers in recent years, but all of them have turned into pie-in-the-sky promises for the secondary market, failing to achieve commercialization. They have been stuck at the "prototype" stage, unable to be "practiced," and even more unable to be transformed into "products" that generate corresponding economic benefits.

At least at the present stage, autonomous driving remains a technology that we can only glimpse on the horizon; its widespread adoption still faces a complex array of challenges: how to achieve scalable deployment, how to operate it in real-world settings, how to gain user acceptance, how to align it with existing regulatory frameworks, how governments should formulate relevant laws and regulations, and even how new technologies will reshape our society—these are all exceedingly complex issues.

However, Baidu alone cannot handle all of this. Integrating autonomous driving technology into our current society will be a complex, systematic project that requires comprehensive collaboration across multiple industrial chains and from government to the public. All of these factors mean that it will take a considerable amount of time to put this cutting-edge technology into practical application and achieve true commercialization.

Moreover, since the onset of the trade war with the United States, we have witnessed growing national emphasis on "core technologies." As artificial intelligence represents a critically important frontier for the future, it is clear that the state is increasingly eager to ensure that such core technologies remain under domestic control.

Baidu hopes to leverage Geely to facilitate the implementation of its technology, while it remains to be seen whether the government would be willing to allow a non-state-owned enterprise to deeply engage in the crucial field of autonomous driving.

Therefore, as investors, it is still essential to remain rational and not allow market sentiment to overshadow careful risk assessment.

39K Views