Baidu’s R&D machine consumes $1.5 billion annually
Like Waymo, Baidu (BIDU) has developed an autonomous vehicle platform, which it calls Apollo. Unlike Waymo’s platform, Apollo is open source, suggesting that monetizing access to the platform may not be a priority for Baidu.
However, Baidu has invested a lot in building Apollo. Baidu funnels roughly 15.0% of its annual revenues, or about $1.5 billion per year, to research and development (or R&D). Much of Baidu’s R&D budget goes to research related to artificial intelligence (or AI) technology. AI is at the center of Baidu’s Apollo platform.
How could Baidu recoup its massive investment in Apollo if it offers its software on an open-source platform? According to Baidu’s CEO, Robin Li, there are many ways the company could monetize Apollo. For example, the company could sell advanced digital mapping systems to autonomous vehicle developers connected with Apollo.
Digital mapping is expected to play a crucial role in future transportation technology. This trend could explain why a consortium of German (EWG) automakers bid to acquire Nokia’s (NOK) Here maps business for roughly $3.0 billion.
Baidu could also make money from Apollo by selling autonomous driving simulation systems. Selling data that developers could use to make their self-driving vehicles better could also be a key revenue source for Baidu’s autonomous driving market.
A $7.0 trillion passenger economy
According to a study by Strategy Analytics, self-driving could enable a $7.0 trillion global passenger economy by 2050, suggesting a huge revenue opportunity for self-driving technology developers such as Baidu and Waymo. Waymo is a unit of Google’s parent, Alphabet (GOOGL).
Uber and Tesla (TSLA) are among the companies in the tech, ride-hailing, and auto manufacturing sectors that are also pursuing revenue opportunities in the autonomous driving market.