Baidu Opts for a Similar Strategy to Alphabet’s Waymo
Baidu (BIDU) has a plan to spin off its autonomous driving unit, according to the company’s CEO, Robin Li.
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Move could free cash and energy to grow advertising business
Alphabet didn’t explain in detail why it decided to spin off its autonomous driving unit. In Baidu’s case, Li has hinted that the move was informed by the company’s need to attract investors and partners to its self-driving vehicle program. Spinning off its vehicle technology division could help it to reduce cash burn and allow it to focus on strengthening its core online advertising business. Baidu has struggled lately with tough competition in its advertising business, leading to limited revenue growth.
Chinese laws restricting online advertising also caused disruptions to Baidu in 2016, leading to the company’s lowest ever annual top line expansion. The chart above illustrates Baidu’s annual revenue trend over the last five years.
Baidu won’t manufacture cars directly
Baidu is racing to beat Chinese rival Didi Chuxing to the market with a driverless car. Didi is backed by Apple (AAPL) among other investors. Outside China (FXI) (MCHI), Baidu’s self-driving vehicle ambitions put it in competition with Alphabet, Ford Motor Company (F), and Uber.
Baidu doesn’t intend to produce driverless vehicles in-house, but it will license its autonomous driving technology to traditional automakers. It expects vehicles equipped with its self-driving technology to enter mass production by 2021.