The logo of Baidu Inc. will be displayed at the company’s headquarters on July 3, 2019 in Beijing, China.
Wan Xiaojun | Visual China Group via Getty Images
GUANGZHOU, China – Chinese search giant Baidu will set up an independent electric vehicle company, a person familiar with the matter told CNBC.
The company headquartered in Beijing will be the majority shareholder, while Chinese carmaker Geely will take a minority stake, the person said. Geely will be responsible for the production of the vehicles, while Baidu will focus on the software behind the car.
Baidu and Geely declined to comment when contacted by CNBC.
Hong Kong-listed shares of Geely rose more than 13% after Reuters first reported the news.
Baidu relies heavily on ad revenue, but has sought to diversify into other areas, such as cloud computing and autonomous driving software, areas that analysts see as promising for the company.
The company has already tested its self-driving car software, called Apollo, in public robotic taxi tests in Beijing. Baidu also has its own map app and voice assistant technology called DuerOS, which can be built into a vehicle.
The Chinese electric car market continues to grow, helped by government support in the form of subsidies and charging infrastructure.
According to China’s Ministry of Industry and Information Technology, pure electric vehicle sales grew 4.4% year-on-year from January to November, compared to a 7.6% decline in total passenger car sales over the same period.
Baidu will jump into an increasingly competitive market competing with the likes of Tesla and domestic electric vehicle manufacturers such as Nio, Li Auto and Xpeng Motors.
The last three companies all recently reported a surge in car deliveries for December.
China’s tech giants have all invested in electric vehicles or car-related technology. Alibaba is an investor in Zhiji, an electric vehicle company founded by the Chinese automaker SAIC Motor.
Meanwhile, the driving company Didi launched its own electric vehicle with auto maker BYD, which is backed by billionaire Warren Buffett.
Elsewhere, Hyundai Motor said it was in the early stages of talks about partnering with Apple to make a car.