The Baidu Inc. logo 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 create an independent company for electric vehicles, 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 manufacturing vehicles, while Baidu will focus on the software behind the car.
Baidu and Geely declined to comment when contacted by CNBC.
Shares of Geely listed in Hong Kong rose more than 13% after Reuters reported the news.
Baidu relies heavily on advertising revenue, but it has tried to diversify its business into other areas, such as cloud computing and autonomous management software, which analysts say is promising for the company.
The company has already tested its driverless car software, called Apollo, in public robotics trials in Beijing. Baidu also has its own map app and voice assistant technology called DuerOS, which can be fitted in a vehicle.
The Chinese electric car market continues to grow, aided by government support in the form of subsidies and charging infrastructure.
Sales of pure electric vehicles increased by 4.4% from January to November compared to a year ago, compared to a decrease of 7.6% in the total sales of passenger cars during the same period, according to the Chinese Ministry of Industry and Information Technology .
Baidu will jump into an increasingly competitive market with, among others, Tesla as well as domestic electric vehicle companies such as Nio, Li Auto and Xpeng Motors.
The latter three businesses all recently reported an increase in car deliveries for December.
China’s technology giants have all invested in electric vehicles or car-related technology. Alibaba is an investor in Zhiji, an electric vehicle company founded by Chinese state-owned automaker SAIC Motor.
Meanwhile, funeral home Didi has launched its own electric vehicle alongside carmaker BYD, which is backed by billionaire Warren Buffett.
Elsewhere, Hyundai Motor said it was at an early stage about the commitment with Apple to make a car.