Baidu, nVidia To Build Independent Self-Driving Car Platform

Chip-maker nVidia (NASDAQ:NVDA) and Chinese internet company Baidu (NASDAQ:BIDU) announced a strategic partnership to focus on building a computing platform for self driving cars. ^[1] According to research by Boston Consulting Group, the autonomous car market could be a $42 billion market by 2025, which could be around 12-13% of the total auto market. ^[2] Moreover, China could be the largest market for autonomous features in cars over the next two decades. ^[3]

nVidia’s automotive segment revenues, which reached a record $119 million in fiscal Q2, an increase of  68% year over year, were primarily driven by premium infotainment and digital cockpit features in mainstream cars. The company has managed to ship around 5-to-6 million devices for cars (with its Advanced Driver Assistance Systems) and has an additional 20-to-25 million such devices to ship in its pipeline. With the growing adoption of nVidia’s DRIVE platform and the increasing popularity of self driving cars, it seems that the automotive segment is likely to be a major growth driver for nVidia’s business going ahead. It is worth noting that nVidia has been working on building its automotive computing platform for over a decade and is in a strong position to leverage this growth.

nVidia’s DRIVE PX 2 Platform For Autonomous Car Vehicles

nVidia’s DRIVE PX 2 automotive supercomputer, which is an upgrade over the two year old DRIVE PX platform, is seeing strong adoption among Tier 1 OEMs, start-ups and research institutions to develop autonomous driving technologies. Within a short span of time since its launch, the DRIVE PX 2 automotive supercomputer is being shipped by nVidia to around 80+ car companies. The robust features offered in the DRIVE PX 2 platform is the driving factor behind its growing adoption. The DRIVE PX 2 platform is capable of understanding in real time what’s happening around the vehicle, by constantly processing the data coming in from the vehicle cameras and sensors to produce complex images of objects around the vehicle.

How This Approach Benefits Baidu & nVidia

Baidu is well-positioned in mapping technology and has a robust cloud service platform, giving it the ability to gather data and leverage its technology to build a self-driving platform. Integrating nVidia’s deep learning expertise in processing the data and functionality to precisely help locate the vehicle on an HD map and plan a safe path should help Baidu monetize this. It should be noted that for a safe experience in a self driving vehicle, it must be capable of knowing exactly where it is, recognize objects around it, and continuously calculate an optimal path to the destination.

The agreement between Baidu and nVidia involves building an autonomous driving platform on an open platform that allows other automakers to use it for their own self-driving vehicles. This platform will be available for branded car OEM consumer vehicle offerings, as well as fleets of driverless commercial vehicles. Making an open platform that can be purchased by automakers can have a two-fold impact on the market.

1. Baidu and nVidia can be forerunners in the self-driving car market as an integral part of the supply chain. The platform could witness strong demand from auto companies that haven’t independently worked on developing their own self-driving cars. This strategy takes away the risk of investing in production facilities required for an auto company. Additionally, it involves limited involvement in building distribution facilities and sales channels in the auto market across the world, making it a relatively low risk and a relatively low return opportunity.
2. On the other hand, companies that are working on building a self-driving car from scratch could be key players in the long run – something like an equivalent of what Apple (NASDAQ:AAPL) is in the smartphone market. (Read: Self-Driving Cars, Part 2: Size of Opportunity Involved) Many companies such as Google (NASDAQ:GOOG), Apple and Tesla Motors (NYSE:TSLA) are all potentially looking to become the market leaders in this domain in the long run.

The resulting Transportation-as-a-Service (TaaS) market has two distinct models for ownership of autonomous vehicles: 1) self-driving cars that are owned by large companies and operated like an on-demand car rental service; or 2) self-driving cars are owned by individuals and run like the Uber or Airbnb model. If one considers the end-to-end supply chain of the products and services involved in the transportation-as-a-service market, the most valuable component here is software and machine-learning capabilities. Irrespective of who owns the vehicles, the Baidu-nVidia deal could take away the risk of vehicle ownership and has the potential to make both players integral to the manufacturing supply chain of the self-driving car market.

See our complete analysis for Nvidia

See our complete analysis for Baidu

Read more on this topic:

• Self-Driving Cars: The Building Blocks of Transportation-as-a-Service
• Self-Driving Cars Part 2: Size of Opportunity Involved
• Self-Driving Cars Part 3: Key Challenges, Players, State of the Market Right Now

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1. Baidu and NVIDIA Team Up on World’s First Map-to-Car Platform for Self-Driving Cars, nVidia Blog, September 2016 [↩]
2. The Autonomous Vehicle: The Car of the Future, Boston Consulting Group Report, April 2016 [↩]
3. China’s Roadmap to Self-Driving Cars, Fortune, September 2016 [↩]