Analysts Skeptical of Baidu's Robotaxi Ambitions Despite Hong Kong Rally

Baidu's stock has seen a dip after a brief surge due to skepticism about its autonomous ride-hailing plans. Analysts now predict a record low price target. While China's rapid adoption of autonomous driving is promising, concerns about competition, regulation, and macroeconomic challenges are causing caution. Despite investments in AI and partnerships with Tesla, uncertainties remain, with mass robotaxi commercialization still several years away.

Baidu, the Chinese tech giant, has witnessed a dip in its stock price despite a brief surge of optimism surrounding its autonomous ride-hailing plans. Skepticism about competition, regulation, and macroeconomic challenges has prompted analysts to lower their price targets to record lows [1]. The future of Baidu's autonomous driving business, represented by its Apollo Go project, remains uncertain.

China's rapid adoption of autonomous driving presents a promising opportunity for Baidu and its competitors. The nation's internet search leader is investing heavily in generative AI and autonomous driving, diversifying its business amidst slowing economic growth and declining advertising revenues [1]. Baidu's Apollo Go is expected to break even in Wuhan this year and become profitable in 2025 [1].

Despite these encouraging signs, challenges loom. Competition from local and global players such as Didi, Alibaba, and Tesla, along with regulatory hurdles and macroeconomic uncertainties, raise concerns about the timeline and profitability of mass robotaxi commercialization [1].

Baidu's Apollo Go project is currently undergoing testing in 11 Chinese cities, with plans to conduct unmanned auto driving tests in Beijing, Wuhan, Chongqing, Shenzhen, and Shanghai [2]. Operating costs are expected to drop significantly, potentially contributing to profitability [1].

Investors, however, remain cautious. Baidu's stock has experienced a notable decline this year, with the company reporting slowing revenue in its latest quarter [1]. The Chinese Ministry of Industry and Information Technology's recent announcement allowing pilot road tests for selected self-driving cars in designated areas provides some optimism, but the path to commercialization remains uncertain.

References:

[1] Li, Muhua. (2024, July 10). Baidu Shares Surge in Hong Kong as Robotaxi Orders Increase. Bloomberg. https://www.bloomberg.com/news/articles/2024-07-10/baidu-shares-surge-in-hong-kong-as-robotaxi-orders-increase

[2] Investopedia. (2023, August 6). Baidu Gets a Boost on Suggestions Its Robotaxi Business is Taking Off. Investopedia. https://www.investopedia.com/baidu-gets-a-boost-on-suggestions-its-robotaxi-business-is-taking-off-8675788