Baidu's Apollo Go Robotaxi Unit Aims for Profitability by 2025

Baidu's Apollo Go aims for profitability in 2025, with robotaxi rides hitting 839,000 in Q4 2023, amid industry growth and challenges.

By Bill Bullington

5/15, 01:10 EDT

Key Takeaway

  • Baidu's Apollo Go robotaxi unit is projected to turn profitable by 2025, with a significant increase in driverless rides and operational efficiency.
  • The introduction of the 6th generation Apollo robotaxi at a cost less than half of its predecessor underlines Baidu's strategy to reduce costs and expand service.
  • Despite industry challenges and skepticism from competitors, Baidu's advancements indicate growing investor interest and potential in the robotaxi market.

Robotaxi Market Evolution

Chinese tech giant Baidu has announced optimistic projections for its Apollo Go robotaxi arm, expecting it to turn profitable by next year. This announcement comes amidst a backdrop where Tesla, led by Elon Musk, is also intensifying efforts to expand its robotaxi business amid declining revenues. Baidu, a leading figure in China's emerging robotaxi market, received authorization from a Beijing district to start charging fares for its robotaxi service in November 2021. This service took a significant leap forward in September 2023 when Baidu, along with startup Pony.ai, was permitted to charge for completely driverless rides within the same district.

In the final quarter of 2023, Apollo Go reported approximately 839,000 rides, showcasing the growing acceptance and usage of robotaxi services. Notably, about 45% of the orders in Wuhan during the fourth quarter were fully driverless, marking an increase from 40% in the previous quarter. This growth is attributed to the expansion of service areas and a reduction in labor costs per ride as the reliance on human staff inside the vehicles decreases.

Cost Reduction and Expansion

A significant development in Baidu's robotaxi venture is the announcement of the 6th generation Apollo robotaxi, which is priced at roughly 200,000 yuan ($28,169). This price point is less than half that of its predecessor, indicating Baidu's commitment to making robotaxi services more economically viable. The company plans to deploy 1,000 of these new generation vehicles in Wuhan, a city that has already seen the operation of numerous driverless Baidu vehicles.

Baidu's strategy focuses on decreasing operational costs while simultaneously increasing the volume of orders. The company's press release highlighted that Apollo Go's unit economics are nearing a break-even point, with expectations to achieve balance in the fourth quarter of 2024 and to turn profitable by 2025.

Industry Perspectives and Challenges

While Baidu and Pony.ai are making strides in the robotaxi market, other industry players remain cautious about the immediate future of fully driverless vehicles. Xpeng Vice Chairman Brian Gu expressed skepticism about the viability of robotaxis as a business within the next five years, pointing to the extensive regulatory approvals required for such services to operate broadly.

Pony.ai's preparation for a listing outside mainland China, as indicated on the China Securities Regulatory Commission website in late April, suggests that the robotaxi sector is gaining interest from investors and is poised for further growth. However, the industry's expansion is contingent on navigating regulatory landscapes and achieving technological advancements that ensure safety and efficiency.

Management Quotes

  • Baidu statement:

    "With decreasing costs and increasing orders, Apollo Go’s unit economics (UE) is nearing break-even, expected to achieve balance in the fourth quarter of 2024 and turn profitable by 2025."

  • Brian Gu, Vice Chairman of Xpeng:

    "He didn’t expect robotaxis to be a real business for at least five years."