Baidu Inc (ADR) (BIDU) showed its hand earlier this week, acknowledging that it would soon start testing self-driving cars in the U.S. as it aims to put a driverless car with commercial potential on the roads by 2018.
Google, the dominant subsidiary of Alphabet Inc (GOOG, GOOGL), cannot be happy.
The man leading the project, Andrew Ng, is the former head of Google Brain AI, and won acclaim for developing a computer program that recognized cat faces without following traditional, defined step-by-step processes. Needless to say, his work has wider applications.
If Ng was going to work on driverless cars, there’s no doubt GOOG would prefer he didn’t do so for Baidu, which is sometimes called “The Google of China.” So, with BIDU now in possession of this great intellect and former Google employee, does Google have reason to fret?
Where GOOG Has Advantages Over BIDU
First, let’s take a look at what Baidu’s goals are: The Chinese search company wants to “roll out self-driving shuttles running a standard loop in a limited area in China by the end of 2018,” according to the Wall Street Journal.
BIDU also hopes to have a commercially viable driverless car by that point — but from the looks of it, that could be awfully difficult to accomplish.
Although Mr. Ng may have plenty of software and AI know-how, he — and Baidu — lack the vast troves of data that GOOG has been collecting since it first began testing self-driving cars in 2009. Now, it’s true that Mr. Ng worked at Google in the past, but unless he walked away from Mountain View with a trove of Google’s data related to autonomous vehicles, he’ll have to build BIDU’s driverless car division from scratch.
In a highly secretive and competitive area like the emergent self-driving car industry, Google would never let an engineer walk away with such valuable information.
The fact that BIDU is publicly stating its intent to have a commercially viable self-driving car by 2018 is somewhat ridiculous given its late entrance into the market. If by commercially viable it means mass-produced, it will need to partner with existing carmakers. The car business takes time to learn and build up, especially when it comes to “smart” cars.
Take Tesla Motors Inc (TSLA) for example, which has made more progress in developing commercially available cars with autonomous driving features than anyone. Tesla was founded in 2003, and is only expecting its first mass-produced vehicle, the Model 3, to be available in late 2017.
Apple Inc. (AAPL), with its nearly limitless resources, is rumored to be working on its first electric car too, but reports indicate that it probably won’t be available until 2019.
This highlights the far-fetched nature of BIDU’s recent statements, and personally I don’t think GOOG shareholders should lose a wink of sleep over it. I actually wouldn’t be surprised if Baidu’s mission to test drive autonomous cars in America faced some intense scrutiny from D.C.
Lawmakers have every incentive to protect American businesses and jobs, and giving a Chinese-owned tech company access to our roads, helping it to compete with GOOG, Tesla, Apple, Uber and others, could very feasibly be an unpopular political stance. One wonders what a President Trump would think of such an arrangement.
But on a serious note, BIDU’s timeline is likely to raise eyebrows in Washington and Silicon Valley alike. Last year, the U.S. charged a number of Chinese military officials with using cyber-terrorism to steal trade secrets from Alcoa Inc (AA), United States Steel Corporation (X), and several other companies and groups.
China is well-known for stealing or appropriating valuable technology from the U.S. that the country itself did not have the ability or skill to develop, and it has understandably bred a spirit of distrust. It has gotten so bad that American regulators have the ability to block certain acquisitions of U.S. companies by Chinese counterparts, since it could compromise national security.
At the end of the day, GOOG’s experience in the area should give it a massive leg up on BIDU.
Baidu’s “commercially viable” self-driving car is likely to be vastly inferior to American counterparts with years of additional research and data to work with. And if BIDU’s car is just as good as Google’s or Tesla’s … well, the U.S. may have a few questions.
As of this writing, John Divine did not hold a position in any of the aforementioned securities. You can follow him on Twitter at @divinebizkid or email him at editor@investorplace.com.
