Baidu's Robotaxi Sets Stage For Driverless Revolution With 54.6% Upside: Analyst

Several factors could help Baidu.com Inc‘s BIDU Robotaxi initiative disrupt urban transportation, analysts note.

What Happened: According to Goldman Sachs’ Lincoln Kong, Baidu’s Robotaxi launch is expected to accelerate user adoption and expand the company’s presence in the autonomous vehicle market.

At this early stage, policy support from city governments and increasing Robotaxi fleet coverage are pivotal. These factors are not only driving user adoption but also setting the groundwork for Baidu’s future revenue growth.

While near-term revenue contributions are expected, the scalability of the car fleet and improvements in unit economics are critical for long-term success, Kong says.

Here are the factors that will influence Robotaxi’s profitability:

• Average Price Per Trip: Baidu offers an 80% discount compared to regular taxis. This will likely phase out as the service gains traction.
  
• Utilization Rate: With cars currently operating at over 60% utilization, there is room for efficiency improvements.
  
• Safety Personnel: Baidu’s current setup involves one person monitoring two cars. In cities like Wuhan, the RT6 launch could see fully driverless operations, significantly improving economics.

Kong projects that Baidu could achieve positive unit economics by 2025. Daily operating profits per car range from RMB 25 to 300.

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Why It Matters: Over the past few weeks, Baidu has made significant strides in its Robotaxi policy rollout. It had gained support from major cities like Shanghai and Beijing. This support is crucial as Baidu prepares to launch its next-generation RT6 Robotaxi before the end of 2024.

The global Robotaxi market could reach $25 billion in the long term. In China alone, with its 4-5 million ride-hailing cars, even a modest 5% Robotaxi penetration could translate to a RMB 35 billion (US$5 billion) market, says Kong.

What’s Next: Despite the promising Robotaxi prospects, Baidu faces near-term softness in advertising due to macroeconomic challenges and its AI-driven revamp of the search experience.

Kong anticipates a turnaround in ad revenue by year-end, alongside accelerated growth in Baidu's cloud business in the second half of 2024.

Price Action: Goldman Sachs maintains a Buy rating for Baidu, with a revised 12-month price target of $144. The current share price of $93.15 implies a significant upside of 54.6%.

On last check Tuesday, Baidu shares were up 0.68%.

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