In leaked reports, Baidu shows it is in the global robotaxi race – Bamboo Works

According to media reports, the autonomous driving contender plans to deploy its robotaxis globally, but will likely continue to focus on its home operations in China for now

Key Takeaways:

• Baidu’s reported international robotaxi expansion plans are more like a strategic narrative to demonstrate future potential than an immediate priority
• The company’s robotaxi operations in Wuhan are expected to reach breakeven by year-end, with the company’s overall profitability forecast for 2025

By Hugh Chen

Tesla’s “We, Robot” event was the talk of the autonomous driving world when the company unveiled its long-announced robotaxis on October 10 to mixed reviews. But only two days before Baidu Inc. (BIDU.US; 9888.HK) made Robotaxi headlines with reports of plans to launch a similar program outside its Chinese base, showing the company was eager to keep up with hometown rivals WeRide And Pony.aias well as Google’s Waymo.

But the reports, all from unnamed sources, may be more talk than any immediate action plan Baidu has put in place to show that the company is also in the global robotaxi competition as a direct competitor to Tesla and the others .

The Wall Street Journal was one of several media outlets reporting Baidu’s global ambitions: Last week, the company planned to test and deploy its Apollo Go robotaxis in locations such as Hong Kong, Singapore and the Middle East. The report said Baidu discussed such plans with local companies and regulators in these regions.

The leaks appear designed to spur investor interest in Baidu’s autonomous vehicle business, which has gained significant momentum after a decade of quiet development. The company recently forecast that its robotaxi operations in the central Chinese city of Wuhan, where the majority of its fleet operates, will break even by year-end and the overall business will be profitable by 2025.

Baidu likely views international expansion as a factor in achieving the scale needed to generate meaningful returns from the decade of its investments, adding a compelling growth story to its autonomous driving story. Despite investing heavily in autonomous driving and a variety of other areas over the years, Baidu still relies overwhelmingly on its original Internet search business for the majority of its profits. It has tried to diversify to show that it is more than just a one-trick pony, but so far without success.

Baidu shares have seen a significant upward trend over the past two months, with Friday’s closing price up 28% from its lows in early September. Much of this is not directly related to the company’s robotaxi developments, but rather to a broader recent rally in Chinese stocks, fueled by recent signs that Beijing will take more aggressive steps to stimulate the country’s economy.

Interestingly, investors reacted somewhat cautiously to news of Baidu’s overseas expansion plans, suggesting they may not be as eager for such large new spending on a program that already has a lot of potential in China. On October 9, the day the news first broke, Baidu shares fell slightly by 2.7%.

It’s important to note that self-driving technology isn’t expected to boost Baidu’s revenue any time soon. Despite frequent claims that the company is transforming itself from an advertising-dependent Internet search company into an AI powerhouse, investors should be aware of the multiple challenges Baidu faces in commercializing this technology.

Such hurdles go beyond mere competition, which is becoming ever greater. Baidu also must grapple with issues common to the entire autonomous vehicle industry: advancing the still-mature technology, navigating complex regulatory requirements in various jurisdictions, and overcoming public skepticism about the safety and reliability of self-driving vehicles.

A new growth driver?

In July, Baidu reported that its robotaxi service had made more than 7 million total rides in 11 Chinese cities. In its last quarterly earnings release in August, company executives said 899,000 rides were provided to the public in the second quarter of 2024, a 26% increase from a year earlier.

While it seems impressive, much of the increase is due to a relatively new commercial venture. Apollo Go only began its commercialization efforts in 2022, when Baidu was among a select few companies granted licenses in Wuhan and Chongqing to operate fully driverless vehicles on public roads for commercial purposes without security guards on board.

Since then, the service has been expanded to other cities, and at the same time other Chinese municipalities followed the example of Wuhan and Chongqing and allowed commercial robotaxi operations.

Despite the impressive ride numbers, Baidu has yet to disclose revenue figures for its robotaxi service, suggesting its financial contribution may still be minimal.

The future success of Baidu’s robotaxi service will depend on the company’s ability to further expand its fleet and enter more cities. While Baidu did not disclose the total number of robot taxis deployed, the company said it operates 500 vehicles in Wuhan alone, 400 of which are completely driverless. This fleet is expected to be increased to 1,000 by the end of the year.

Baidu is focusing on cost reductions to achieve this rapid expansion and achieve its profitability goals. The aim is to reduce hardware costs by outsourcing vehicle production to third-party companies. It also seeks to optimize the cost of security monitoring, which is carried out remotely in some cities and on board in others.

A July report from JPMorgan estimates that Baidu’s robotaxi operations could break even in some select cities in the second half of this year, based on the expected rollout of next-generation vehicles and significant changes in the ratio of vehicles per safety monitor.

Despite its cost-cutting efforts, Baidu’s pace of expansion also depends on factors beyond its control, particularly in the regulatory area. While the Chinese government is keen to advance autonomous driving technology, particularly to remain competitive with the US, it is also proceeding cautiously.

That caution was highlighted in July when Baidu’s long-term deployment of robotaxis in Wuhan suddenly sparked debate as some drivers complained about job displacement. This issue is particularly sensitive in China’s current slowing economy, which has led to widespread job losses and has many viewing taxi driving as something of a last resort.

Furthermore, Baidu is not alone in China’s robotaxi market, which is expected to reach 1.33 trillion yuan ($188 billion) by 2033, according to the JPMorgan report. Pony.ai and WeRide, both of which are exploring IPOs, are also in the running. and this also applies to the electric vehicle manufacturer Xpeng. WeRide has already been developing its services in several overseas markets over the past month announced a new partnership to offer its robotaxi services in the UAE via Uber.

At this point, overseas expansion appears to be more of a future plan for Baidu than an immediate priority, as the company is expected to focus on building the product and refining the technology in the domestic market in the near future. Despite all the hype, this technology has been slow to reach the mass market, and it’s far from clear when adoption will finally accelerate.

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