Baidu Inc. is displayed 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 manufacturing 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 percent after Reuters first reported the news.
Baidu relies heavily on advertising revenue, but has sought to diversify its business into other areas, such as cloud computing and self-management software, which analysts see as promising for the company.
The company has already tested its driverless car software, called Apollo, in public robotics tests in Beijing. Baidu also has its own mapping application and voice assistant technology called DuerOS, which can be equipped inside 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 from January to November increased by 4.4% year-on-year compared to a 7.6% drop in total car sales at the same time, according to China’s Ministry of Industry and Information Technology.
Baidu will jump into an increasingly competitive market, competing with Tesla as well as national electric vehicle companies such as Nio, Li Auto and Xpeng Motors.
The latter three companies recently reported an increase in car deliveries for December.
China’s technology giants have all invested in electric vehicles or automotive technologies. Alibaba is an investor in Zhiji, an electric vehicle business created by Chinese carmaker SAIC Motor.
Meanwhile, Didi has launched its own electric vehicle with automaker BYD, which is backed by billionaire Warren Buffett.
Elsewhere, Hyundai Motor said it was in the early stages of a deal with Apple to make a car.