GUANGZHOU, China — Chinese search giant Baidu will create a standalone electric vehicle company, a person familiar with the matter told CNBC.
The Beijing-headquartered company will be the majority shareholder while Chinese automaker 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.
Hong Kong-listed shares of Geely were up more than 13% after Reuters first reported the news.
Baidu relies heavily on advertising revenue but it has been looking to diversify its business to other areas such as cloud computing and autonomous driving software, areas that analysts see as promising for the company.
The company has already been testing its driverless car software, named Apollo, in public robotaxi trials in Beijing. Baidu also has its own map app and voice assistant technology called DuerOS, which can be equipped inside a vehicle.
China’s electric car market continues to grow, helped by government support in the form of subsidies and charging infrastructure.
Sales of pure electric vehicles from January through November rose 4.4% from a year ago, versus a decline of 7.6% in overall passenger car sales during the same time, according to China’s Ministry of Industry and Information Technology.
China’s tech giants have all been investing in electric vehicles or auto-related technology. Alibaba is an investor in Zhiji, an electric vehicle business created by Chinese state-owned carmaker SAIC Motor.
Meanwhile, ride-hailing firm Didi launched its own electric vehicle with automaker BYD, which is backed by billionaire Warren Buffett.