Toyota and Nissan pair up with Tencent and Baidu for China AI arms race

By Daniel Leussink

BEIJING (Reuters) -Japan's Toyota Motor will pair up with China's Tencent while Nissan will team up with Baidu, the companies said on Thursday, cross-border partnerships that highlight the importance of artificial intelligence for carmakers.

The separate announcements from two of Japan's biggest automakers at the Beijing auto show also underscored the attempt by Japanese manufacturers to come to grips with the massive technological shifts that have disrupted their once enviable positions in the Chinese market.

Just a few years ago, Japanese car companies were some of the most prominent foreign brands in China. More recently, they have been left flatfooted as local manufacturers led by BYD have snatched market share with software-laden electric vehicles aimed at younger drivers.

Both Tencent, a gaming and social media giant and Baidu, China's leading search engine, have been leaders in the country's generative AI race.

Toyota, the world's largest carmaker by volume, will include technology from tech giant Tencent technology in a China-made passenger vehicle that will go on sale this year, said Toyota's Yiming Xu, a director for brand and communications for China.

The companies will offer services through Tencent's strengths in big data, AI and cloud computing, Xu said.

Nissan said it and Baidu had signed a memorandum of understanding to carry out research on AI and so-called "smart cars". Nissan will use Baidu's generative AI on its platform to study the feasibility of future tech development, it said.

It will also equip its Chinese cars with Baidu's AI products, it said.

The partnerships also show how competitive China has become for automakers, even globe-spanning giants such as Toyota.

Foreign automakers are fighting to show they can remain relevant in China, amid the pressure from the shift to EVs, the rise of domestic brands and a price war.

Toyota has seen sales shrink, although it has avoided the sharp blows that Honda Motor and Nissan have taken.

It saw its sales in China fall 1.7% to 1.9 million vehicles in 2023, the second successive year of decline.

Toyota also showed off two new battery electric vehicle models for the Chinese market at the Beijing show.

(Reporting by Daniel Leussink; Editing by David Dolan, Christopher Cushing and Miral Fahmy)