Is Baidu fumbling it again? Again!

Not Just Autonomous Driving and AI are under attack—Pinduoduo Is Coming for Baidu Too

Is Baidu’s Autonomous Driving Dream Turning into a Nightmare?

I was skeptical enough about Baidu’s future in AI, given its recent missteps with large language models. But with Pinduoduo’s latest attack on Baidu—things are even worse with their AI business. But I’m getting ahead of myself. After taking a closer look at the autonomous driving landscape, I realized Baidu’s self-driving unit is basically the sequel to their AI saga: same plot, same shaky execution

Vision Without Execution

I've always admired Baidu's ability to spot trends long before they become mainstream. They were the pioneers in launching China's first large language model, Ernie Bot, and were deeply invested in autonomous driving well before it was popular. Yet, despite their visionary outlook, I've grown increasingly skeptical of their ability to execute these grand ideas.

Search Business: The Great Decline

Take their core search business, for instance—once the crown jewel of China's internet landscape. It’s painful to watch it gradually crumble, overshadowed by sharper competitors. Pinduoduo’s recent attack might be the final blow to Baidu’s cash cow. Not too long ago, Baidu was part of China's elite BAT trio—Baidu, Alibaba, and Tencent—each roughly equal in market cap. Now, Alibaba and Tencent are giants nearly ten times the size of Baidu. The reason isn't complicated: execution.

AI Race: Losing Early Advantage

Even with their early lead in large language models, Baidu stumbled. Alibaba’s Qwen and Tencent’s Hunyuan apps are dominating downloads, while Ernie Bot lurks in the corner like a forgotten Tamagotchi. Cute, but outdated.

Autonomous Driving: The Next Domino?

I’ve been carefully examining the autonomous vehicle sector in China, spending time researching and analyzing a wide range of companies operating. If you don’t want to miss my upcoming piece on this topic, make sure to subscribe.

Autonomous mobility isn’t just about robotaxis. China’s low-altitude economy (think flying cars, but less Blade Runner ) and industrial mining are where the real action is. Ehang Holdings, a leader in passenger drones, and XPeng, expanding beyond electric vehicles into aerial mobility, are spearheading advancements in airspace technologies.

Meanwhile, the mining industry is undergoing a quieter revolution: firms like EACON Mining Technologies—privately held but bolstered by strategic investments from Zijin Mining Group—and CIDI, which filed for a Hong Kong IPO in November 2024, are deploying autonomous haul trucks and drills in enclosed mine environments. These controlled settings eliminate complexities like pedestrians, traffic, aunties on scooters and regulatory red tape, enabling faster, safer adoption of self-driving fleets.

But let’s get back to Baidu.

The challenges plaguing Baidu's autonomous driving initiatives mirror those I previously outlined regarding its AI endeavors. Autonomous driving continues to stand as one of the last remaining growth pillars sustaining investor optimism about Baidu.

However, after personally testing fully autonomous ride-hailing platforms, I've concluded Baidu's competitive edge in this sector is eroding quickly – they now appear positioned as merely one contender among multiple equals.

Many young startups are entering the field. For example, Pony.ai is aggressively expanding its fleet from around 200 vehicles today to approximately 1,000 this year, with the goal of achieving profitability soon after. They plan to go even further, aiming to reach up to 10,000 vehicles within a few years.

Not only startups - Heavyweights Entering the Ring

Didi, no stranger to intense market battles themselves, is right there alongside Pony.ai. They've secured fresh funding at a valuation of around $5 billion for their autonomous subsidiary and already run a fleet similar in size to Pony.ai. And just when you thought the party couldn't get any more crowded, Huawei—another tough, highly competitive operator—is jumping into autonomous driving too. Huawei is one of the companies I really wish would be listed on the stock market. Incredible company.

If Xiaomi comes after you, you should be scared

Yet, the competitor that makes me most concerned for Baidu is Xiaomi. Led by Lei Jun—a man whose operational prowess genuinely impresses me—Xiaomi excels precisely because they dominate markets that have brutal competition and razor-thin margins, like smartphones. Even Apple, with seemingly unlimited resources, threw in the towel after years of unsuccessful attempts at car-building. Xiaomi, in contrast, entered the automotive arena just two years ago and impressively delivered 135,000 vehicles in only nine months.

Lei Jun isn’t slowing down. In the last government meeting (yes, the one where Jack was invited too, and Baidu didn’t even get a seat at the kids’ table), he pushed for nationwide testing, regulatory clarity, and a dedicated insurance framework to accelerate autonomous vehicle adoption, aiming for full-scale commercialization by 2026. Given Xiaomi’s track record, I’d bet they’re not bluffing.

Baidu’s Achilles Heel

Xiaomi, Didi, Huawei—they’ve all emerged stronger from vicious competitive battles. Meanwhile, Baidu, despite having early dominance in search—a business model virtually foolproof (just ask Google)—has continuously managed to snatch defeat from the jaws of victory. It seems they haven’t won anything meaningful since… ever!

Speaking of Baidu’s brilliant strategic moves, they recently closed the acquisition of YY Live from JOYY Inc. for $2.1 billion, after the original agreement in 2020, which was priced at $3.6 billion, failed to clear regulatory hurdles. That effectively gave Baidu a $1.5 billion discount. This looks much more like a lucky windfall than a stroke of strategic ingenuity. With the live-streaming space evolving rapidly, it’s hard to see how this acquisition can materially change Baidu’s trajectory. If anything, this unit already feels close to obsolete.

I get it—they wanted a piece of the short video market. But spreading itself too thin has always been one of Baidu’s biggest mistakes. Even with the lucky windfall and discount, this deal is a disaster—just another distraction from their core business.

The Road Ahead Looks Rocky

For Baidu, the situation is becoming clear (and a bit grim). Their visionary ideas keep coming, but without operational execution—the kind competitors like Xiaomi, Didi, Huawei, or newcomers like Pony.ai consistently demonstrate—the future looks increasingly uncertain. Baidu might have spotted the path first, but at this rate, they’ll soon be watching from the roadside as their competitors speed by, leaving them as roadkill.

But Baidu is cheap! (So Is a Burning Dollar Bill)

And yes, before you point it out, Baidu looks cheap on a PE basis. But this company’s revenue declined 1% last year. They don’t pay dividends. Their core business—search and online advertising—is completely broken. And as I’ve tried to explain, their long-shot business units like AI and autonomous driving face competition from companies that are much stronger in execution. Here is the first part.

This is just not a no-brainer. There are much better investment opportunities out there. If the price drops significantly (I like my roadkill cheap!) or they manage to turn things around, I’ll reconsider. But at this price, it’s just not obvious to me that you make money.

But it gets worse.

Have you heard about Pinduoduo’s direct attack on Baidu’s Fengchao unit? The situation for their advertisement business is even worse than what I have written in my last article a few months ago. This is a massive blow.