Why Baidu needs high-profile car OEM deals

Article By : Junko Yoshida

Baidu hasn’t garnered a high-profile car OEM partnership agreement, and there, analysts say, lies the Chinese Internet behemoth's challenge.

« Previously: Unpacking of Baidu’s car project
Obviously, Baidua has been casting a wider net to advance its AI and related technologies into various niches of robo-car world. However, Baidu hasn’t garnered a high-profile car OEM partnership agreement—like the BMW-Intel-Mobileye deal—or a betrothal with Nvidia-Mercedes Benz-Daimler-Bosch.

There, said Demler, lies Baidu challenge.

He said, “Keep in mind that Baidu just said they’ll ‘initiate a partnership alliance,’ but the only announced partner is Bosch, and I think that’s just for radar sensors. Google already has an actual car-building partner.”

He noted, “It’s meaningless to open up a platform if nobody uses it. The reason behind Baidu’s announcement is it’s attempting to develop an ecosystem based on their platform, as Google did with the Open Handset Alliance for Android. The question is who can they attract to that platform?”

Asked to compare Baidu’s open platform efforts with the BMW-Intel-Mobileye platform, Demler explained that the latter includes an actual carmaker and the leading ADAS processor company. Baidu “may be bigger than some of the other players, but they’re not the only company building such a platform. Strategically, Baidu most resembles Google/Waymo because of the similarity in their Internet businesses.”

Cornering the Chinese market

Asked if Baidu can attract big Western car OEMs to their open platform, IHS Automotive’s Juliussen acknowledged that Baidu’s appeal for now might be limited to smaller carmakers or EV start-ups in China.

Baidu’s known car OEM partners include: BYD, Chery and BAIC, and a start-up, NextEV.

Juliussen, however, isn’t so worried for Baidu. “Think of the global automotive market 20 years from now,” he said. “We are talking about battery-operated EVs, self-driving and driverless cars.” Chinese carmakers that lack experience with curator engine cars will have ample time to develop their own IP and expertise in EVs and highly automated vehicles. In the long run, Baidu will be able to reach the global auto market by way of China’s emerging carmakers, he predicted.

The Linley Group’s Demler isn’t so optimistic. Asked if Baidu’s open platform pitch is the company’s strategy to corner the Chinese market, he said it’s more complicated.

“No one company will ‘corner the market’ anywhere," Demler said. "What they can do is dominate the mapping and cloud components of the Chinese autonomous-driving market, but Mobileye already has partnerships with Chinese carmakers, and Baidu is using Nvidia’s Drive PX system in their test vehicles.”

Meanwhile VSI’s Magney believes Baidu is taking an approach likely to appeal to Chinese OEMs.

“An open-source stack may stimulate the take up of automation in China as there are many OEMs and could enable automated features much more quickly that developing themselves. They also have a bit of a captive market because of their size–similar to mobile,” he explained.

Volume, scale

As Demler noted, “Baidu has an AI lab and an autonomous driving lab in Silicon Valley. Baidu has a lot of experience in AI, especially in their cloud platform.” But let’s face it. “In autonomous driving, Baidu has much less experience than Google,” he concluded.

Juliussen cautioned that Baidu’s war chest should never be underestimated. In the recent fiscal year that ended Dec. 31, Baidu reported $10.16 billion in revenue. The company’s operating profit was $1.4 billion.

More important, Juliussen believes the volume and scale of the Chinese automotive market can ultimately work in Baidu’s favour. “Other than the U.S., none of the countries in Europe has the volume to pull off anything like this.”

Next: Baidu's biz model question »

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