China's Baidu Inc is considering making its own electric vehicles and has held talks with automakers about the possibility, three people with knowledge of the matter said, the latest move in a race among tech firms to develop smart cars.
The search-engine leader, which also develops autonomous driving technology and internet connectivity infrastructure, is considering contract manufacturing, one of the people said, or creating a majority-owned venture with automakers.
The initiative would be a step up from internet peers such as Tencent Holdings Ltd, Amazon.com Inc and Alphabet Inc, which have also developed auto-related technology or invested in smart-car startups.
Baidu has held preliminary talks - without reaching any decisions - with automakers including Zhejiang Geely Holding Group Co Ltd, Guangzhou Automobile Group Co Ltd (GAC) and China FAW Group Corp Ltd's Hongqi, on a possible venture, the people said.
They declined to be identified as the talks are private.
Baidu declined to comment. GAC said it has a strategic partnership with Baidu and that any further cooperation was subject to discussion. Geely said it was not familiar with the matter. FAW did not respond to a request for comment.
Baidu's Nasdaq-listed shares hit a 1-1/2 year high to trade up as much as 11% after Reuters reported the talks with automakers.
Shares of Geely's Hong-Kong-listed subsidiary, Geely Automobile Holdings, were up as much as 5% in the afternoon. Shares of GAC rose about 1%.
Baidu established autonomous driving unit Apollo in 2017. The unit mainly supplies technology powered by artificial intelligence and work with automakers such as Geely, Volkswagen AG, Toyota Motor Corp and Ford Motor Co.
Baidu operates autonomous taxi service Go Robotaxi with safety drivers on board in Beijing, Changsha and Cangzhou, and plans to expand to 30 cities in three years. It gained approval last week to test five cars in Beijing without safety drivers.
Its talks regarding manufacturing come after Didi Chuxing last month launched a purpose-built van for ride-hailing services with automaker BYD Co Ltd. Meanwhile, tech giant Sony Corp in January unveiled an electric concept car with self-driving functions.
Building cars would represent a dramatic development in Baidu's push to diversify income streams as growth plateaus in its core search business, where revenue grew just 2% last year.
(Reporting by Yingzhi Yang and Yilei Sun in Beijing and Brenda Goh in Shanghai; Editing by Christopher Cushing and Robert Birsel)
