Why Is Baidu Building Driverless Cars?
Given the high rate of accidents and traffic congestion in China, Chinese consumers are more interested in autonomous cars compared to the U.S. [1], and Baidu (NASDAQ:BIDU) appears to be tapping into this trend. The company did a test drive of its autonomous car on December 10 via a 30 km loop route around its Beijing headquarters. . [2]. In June this year, Baidu had announced its plans to roll out driverless cars by the second half of 2015, created in partnership with BMW. [3]. The company claims that its autonomous car is the first in China to have demonstrated full autonomy under mixed road conditions. The car is built entirely by Baidu and is the product of its augmented reality-focused Institute of Deep Learning. While it appeared that Baidu was trying to mimic Google while entering into the driverless cars space, its production speed and brand name in China will give the company a competitive advantage to capture a higher market share in the potentially high growth Chinese driverless cars market.
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China Projected To Be The Largest Market for Driverless Cars By 2035
According to the Boston Consulting Group, autonomous cars could create a market of $42 billion by 2025, with a large number of driverless cars hitting the roads by as early as 2017. [4] The report states that there could be 18 million partially autonomous vehicles and 12 million fully autonomous vehicles by 2035 with China being the largest market by that time. Several players are working on autonomous cars with the next generation Audi A8 capable of fully autonomous driving expected to be launched by 2017. Ford, Toyota and Nissan hope to launch their fully autonomous vehicles by 2020. [5] A 2014 study by Nielsen noted that Chinese consumers are more open to the idea of automated driving than those in Germany and the U.S. and are also willing to pay extra for connected car services. [6] The Chinese government is also interested in using the internet to make the country’s roads safer and reduce pollution and this could provide the push towards driverless cars. These factors along with Baidu’s strong brand and presence in China give it a huge edge in the driverless cars market, which is expected to grow at a rapid pace especially in China and get increasingly competitive over the years.
Banking On Its Technological Strength
Baidu is not looking to become a car manufacturer, but is using its Baidu Auto Brain project to develop mapping for HAD (highly automated driving) vehicles. The partnership with BMW is to marry the automaker’s expertise with Baidu’s technological strength. It’s HAD maps record 3D road data within few centimeters of accuracy of vehicle positioning. The company claims that with its object recognition and environment perception technology the car can detect, recognize and follow other vehicles with high accuracy. Baidu hopes to use this technology for other vehicles such as buses and expand the number of routes mapped by HAD mapping.
Baidu seems to be ahead of the game with its strategy to work with automakers such as BMW and develop the technical expertise required to build driverless cars. Given the growth potential in China and higher preference of Chinese consumers toward driverless cars due to environmental and safety concerns, Baidu’s entry in this space appears to be part of a long term growth strategy and is timed rightly to get the first mover advantage.
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Notes:- Why China is more eager for self driving cars that the West, autoblog, October 2014 [↩]
- China zooms closer to driverless future as Baidu hits road with autonomous car, Techinasia, December 10, 2015 [↩]
- Baidu and BMW plan to launch self-driving car this year, fastcompany.com, June 12, 2015 [↩]
- Driverless-Car Global Market Seen Reaching $42 billion by 2025, Bloomberg, January 2015 [↩]
- Forecasts- Driverless Car Market Watch, driverlessfuture.com [↩]
- Automated Driving Piques Chinese Consumer Interest, Wardsauto.com, October 2014 [↩]