Baidu driverless driving: Ten years of investment, one day of explosion?

“In the last two or three years, there have been almost no takeovers.”

On May 24, on the road in Yizhuang, Beijing, the safety officer of Baidu's "Carrot Run" L4 driverless taxi said confidently. Although the other person is sitting in the driving seat, his hands are off the steering wheel and he is not operating the car. A few years ago, driverless taxis would occasionally take over while they were driving.

In Baidu’s self-driving taxi, the safety officer’s hands are off the steering wheel. Photo by Chen Chongshan

In fact, Baidu has already started the commercialization of fully driverless driving without safety personnel in the car. In August 2022, Baidu announced that it had obtained the country's first batch of fully unmanned demonstration operation qualifications for autonomous driving issued by the governments of Chongqing, Wuhan and other places. Baidu's "Luobo Kuaipao" fully unmanned self-driving travel service serves cities, and currently covers Wuhan, Chongqing, and even Beijing. Even in January 2023, Baidu signed an agreement with Wuhan to implement a full-area, fully driverless project.

In the foreseeable future, L4 autonomous driving will usher in a period of important market opportunities.

This period of opportunity may stem from the second catfish that Tesla is about to bring - FSD (Tesla Fully Autonomous Driving). On May 12, Chen Kele, deputy director of the Intelligent Manufacturing Promotion Division of the Shanghai Municipal Commission of Economy and Information Technology, said that in the next stage, Shanghai will further deepen its cooperation with Tesla and promote the deployment of autonomous driving and other functional sectors in Shanghai. At the Tesla shareholders meeting on May 17, Musk believed that FSD will be ten times safer than human drivers in the future. Currently, the profit margin of FSD software can reach 80%, far exceeding the profit margin of the entire vehicle. In this regard, CITIC Securities believes that Tesla, as a pioneer in the entire autonomous driving field, will lead the global autonomous driving to the implementation stage.

Baidu is not afraid of competition from Tesla. As early as the first quarter of 2021 financial report meeting, Robin Li stated: "At this moment, in the field of global intelligent driving, there is no more comprehensive and mature solution than Baidu." CMB International also believed this year that Baidu had transformed from a search giant to a leader in the intelligent driving industry.

A report from Baidu "Journey to No Man's Land: 2022 Baidu Autonomous Driving Travel Service Annual Report" shows that Baidu's "Luobo Kuaipao" online car-hailing service has covered Beijing, Shanghai, Guangzhou, Shenzhen, Wuhan, Chongqing and other cities. In the past Seven new commercial cities were added in one year. In 2022, the number of active users of the "Luobo Kuaipao" platform has nearly doubled compared with 2021, and the order volume has also achieved multiple growth. As of the first quarter of 2023, the order volume of "Carrot Run" has exceeded 2 million.

Not only "Carrot Run", Didi, T3 Travel, Cao Cao Travel, etc. are also aware of the new competition brought by driverless taxis, and have "stormed" driverless online ride-hailing technology. In this regard, Zhang Yongwei, vice chairman, secretary-general and chief expert of the China Electric Vehicles Association of 100, has long pointed out that the rise of autonomous driving will bring widespread and far-reaching impacts, including changes in business models.

The future of autonomous driving is bright, but the road is still very winding.

Currently, the autonomous driving industry is at a trough. According to Crunchbase statistics, in the past two to three years, the valuations of more than a dozen self-driving companies listed in the United States have experienced a collective avalanche. Since this year, it has been reported that Alibaba Damo Academy has disbanded its autonomous driving team, and Wang Chuanfu believes that autonomous driving is "nonsense."

In this regard, at the third "High-Dimensional Dialogue" recently hosted by the Committee of 100, Zhang Yongwei said that there is an interesting phenomenon in the automotive industry. After seeing opportunities, some companies find it difficult to endure loneliness and maintain concentration. However, successful companies are often those that can maintain their capabilities.

Baidu's self-driving car project started in 2013. After ten years of investment and research and development, it has maintained strategic focus and focused on driverless driving. Baidu predicts that around 2025, there will be large-scale commercial operations of driverless taxis around the world. In this wave, Baidu’s “Carrot Run” will maintain its leading position.

This article focuses on Baidu’s autonomous driving business and attempts to answer the following three questions:

1. What is the development process of Baidu’s autonomous driving business?

2. What is Baidu’s R&D investment in the field of autonomous driving?

3. Given the overall slump in the autonomous driving industry, what are the prospects for the commercialization of Baidu’s autonomous driving?

Confidence comes from Baidu Maps

Baidu’s autonomous driving layout began in 2013.

As a competitor of Baidu, Google began testing autonomous driving in 2009. Although Baidu started working on autonomous driving later than Google, it was the earliest company to take action in the field of domestic autonomous driving. The reason why Baidu dares to take up the banner of domestic autonomous driving research and development is that Baidu has the foundation of autonomous driving - map products.

Baidu Map was originally just a small product under Baidu, but under the strategic transformation advocated by Robin Li, it was adjusted into a strategic product and continued to expand its territory. According to the "China Mobile Map Market Research Report for the First Half of 2013" released by iiMedia Research, Baidu Maps ranked first with a market share of 35.5% that year, higher than Amap's 26.7% and Google Maps' 24.9% market share. .

Even in 2021, Baidu still accounts for 32.7% of the high-precision map market share, ranking first.

Source: IDC

The important application scenarios of Baidu Maps, especially Baidu HD Maps, are assisted driving, driverless driving, and smart transportation. Currently commercialized assisted driving is inseparable from high-precision maps that can help vehicles accurately identify road information. The exploration of autonomous parking is also based on high-precision maps. As for driverless driving, Baidu's high-precision map can enable vehicles to achieve self-positioning with centimeter-level accuracy, thereby better planning routes, making correct and appropriate driving behaviors, and protecting people in the vehicle and external traffic safety.

Therefore, it is logical for Baidu to start with maps and move into autonomous driving research and development. At that time, Baidu's core autonomous driving technologies, such as high-precision maps, positioning, perception, intelligent decision-making and control modules, all came from Baidu Maps.

Baidu's autonomous driving research and development has been continuously deepening.

In 2015, Baidu established the autonomous driving division (L4 division).

In 2016, Baidu obtained California's autonomous driving road testing license and continues to conduct autonomous driving road testing in the United States.

In April 2017, Baidu officially named its autonomous driving business the "Apollo" project, borrowing the meaning of the Apollo moon landing program, with the goal of "becoming the first in the autonomous driving industry."

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Currently, Baidu Apollo has accumulated more than 4,600 autonomous driving patent families. Moreover, the "Baidu Artificial Intelligence Patent White Paper 2022" shows that for four consecutive years, Baidu ranks first in the world in terms of the number of autonomous driving patent applications. Baidu's autonomous driving has been upgraded from "technical verification" to "user experience".

Baidu driverless test vehicle in Yizhuang, Beijing. Photo by Chen Chongshan

A decade of tragedy and money-burning

The achievement of results is inseparable from continuous investment. Since 2013, investment in autonomous driving has gradually become an important expenditure for Baidu.

As Robin Li said, over the past ten years, Baidu has continued to be in a state of high-pressure, marathon R&D investment.

According to Baidu’s financial report, since Baidu officially established the L4 business unit in 2015, its annual R&D investment is no less than 10 billion. Even in 2019, when it was losing money, its R&D investment increased by 16% year-on-year, reaching 18.346 billion yuan. In the past two years, Baidu's R&D investment has jumped to more than 20 billion yuan. It will be about 23 billion in 2022, which is ten times that of 2012 ten years ago, before autonomous driving research and development began.

Overall, Baidu's overall R&D investment exceeded 150 billion yuan in the ten years after 2013. Compared with top foreign technology companies, such as Google, and domestic technology companies, such as Huawei, Baidu's overall R&D investment is still small. However, Baidu's R&D investment intensity is not inferior to Google and Huawei.

R&D investment intensity is the ratio of the total amount of funds invested in R&D by an enterprise to the overall sales revenue. It is the core indicator that reflects the technological innovation of an enterprise. Google’s R&D investment is very high and often ranks first in the world. However, in many years since 2013, Baidu’s R&D investment intensity has exceeded Google’s. Domestically, Baidu's R&D investment intensity often ranks first among private companies, once surpassing Huawei, which is known for its high R&D investment.

For ten years, Baidu's "ascetic" persistence in autonomous driving and other aspects has come at the expense of continuous erosion of profits. Especially in the past two years, Baidu's R&D investment of more than 20 billion yuan has caused Baidu's net profit margin in the past two years to be the second to third lowest since its listing.