The Baidu Inc. logo is shown at the company’s headquarters on July 3, 2019 in Beijing, China.
Wan Xiaojun | Visual China Group through 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 Beijing-based company will be the majority shareholder, while Chinese carmaker Geely will take a minority stake, the person said. Geely will be responsible for making the vehicles, while Baidu will focus on the software behind the car.
Baidu and Geely declined to comment when contacted by CNBC.
Geely’s Hong Kong-listed shares rose more than 13% after Reuters first reported the news.
Baidu is heavily dependent on advertising revenue, but has been looking to diversify its business into other areas such as cloud computing and self-driving software, areas that analysts see as promising for the company.
The company has already been testing its driverless car software, called Apollo, at public robotics trials in Beijing. Baidu also has its own mapping application and voice assistant technology called DuerOS, which can be equipped inside a vehicle.
China’s electric vehicle market continues to grow, aided by government support in the form of subsidies and recharging infrastructure.
According to the Ministry of Industry and Information Technology of China, sales of pure electric vehicles from January to November increased by 4.4% over last year, compared to a fall of 7.6% in global passenger car sales at the same time.
Baidu will jump into an increasingly competitive market, competing with both Tesla and domestic electric vehicle companies such as Nio, Li Auto and Xpeng Motors.
All of the latter three companies recently reported an increase in vehicle deliveries in December.
All the tech giants in China have invested in electric vehicles or automobile-related technology. Alibaba is investor in Zhiji, an electric vehicle company set up by Chinese state-owned vehicle manufacturer SAIC Motor.
Meanwhile, the Didi firm launched its own electric vehicle with automaker BYD, which has the backing of billionaire Warren Buffett.
Elsewhere, Hyundai Motor said it was in initial discussions about linking up with Apple to make a car.