Baidu Inc (NASDAQ:BIDU) becomes the latest tech giant entrant in the lucrative self-driving electric vehicle market.

Reuters reported that Baidu has tied-up with Chinese automaker Geely Automobile Holdings Ltd (OTC:GELYF) to create a standalone EV company. Baidu is also looking to raise $3.5 billion from its secondary listing in Hong Kong.

What Happened: Chinese search giant Baidu will own a majority stake in the new smart EV company, while Geely will retain a minority stake. The venture will use Baidu’s software capabilities and Geely’s existing car manufacturing facilities and engineering.

Though the plan remains private, Reuters sources say that both companies intend to use Geely’s EV-focused platform, Sustainable Experience Architecture (SEA), for product development.

Baidu is already developing autonomous driving technology and internet connectivity infrastructure. It also has its own navigation system app and voice assistant technology called DuerOS. 

The search giant’s driverless software named Apollo is used in public robotaxi trials in Beijing.

Baidu is also looking to list in Hong Kong in the first half of 2021 and raise $3.5 billion based on its latest valuation of $70 billion, Bloomberg reports. It has joined a wave of U.S.-listed Chinese firms seeking to access Hong Kong capital markets as trade tensions with the U.S. rise.

Why It Matters: China’s EV market is growing with sales increasing 4.4% YoY in the first eleven months of 2020, even with overall passenger vehicle sales falling 7.6% YoY, as per CNBC. Leading China EV makers saw record deliveries in December.

Baidu will join the crowding China EV market with established competitors like Tesla Inc (NASDAQ:TSLA), Xpeng Inc (NYSE:XPEV), Li Auto Inc. (NASDAQ:LI), Nio Inc (NYSE:NIO), and Warren Buffet-backed BYD Company (OTC:BYDDY).

Baidu is not the only internet giant tying up with legacy automakers. Reportedly, Apple Inc (NASDAQ:AAPL) is also negotiating a tie-up with Hyundai Motor Company (OTC:HYMTF) to develop self-driving vehicles. 

Price Action: BIDU shares are up 5.3% to $207.89 in the pre-market session on the last check Friday, while GELYF shares gained 7.9% on Thursday.

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