Yan Honghui, an analyst with Beijing-based Internet consultancy Analysys International, said: "Rather than making a fortune by simply selling smart cars, companies are betting big on tapping into people's various in-car demands.
"Take Baidu for example. If it knows where you go, what times you typically travel, and the music and entertainment that you use while driving, it can gain a much better understanding of your behavior," she said.
"The data it gathers from the pattern of your behaviors can help it better identify the service you need, and it can profit easily by selling a movie ticket and booking a restaurant."
The world is already on that path. Many vehicles boast features that assist drivers and eliminate errors, including blind-spot alerts, lane-departure warning systems and automatic emergency braking. But fully autonomous vehicles still need to overcome a wide range of barriers, from technology to regulations, before they could become commercially viable.
Wang Jin of Baidu said that to make a premium car such as Mercedes Benz perform all its functions flawlessly, engineers need to write 65 million lines of code.
But making cars smart will need more than 300 million lines of code. "And a fully autonomous car will be much more complicated than that," he said.
So much so, some of the engineers working with Baidu's autonomous driving vehicle unit write code when riding the prototype car.
The company completed its first test drive in December. But to ensure all the technologies deployed are fully ready, the car needs to run on roads for thousands of hours, to figure out all possible scenarios, and to eliminate the risk of accidents, according to Baidu.
It has announced an ambitious plan to make its autonomous driving car commercially available within three years.
However, regulations, rather the lack of them, represent additional hurdles.
Zhang Changqing, a professor at the Law School at Beijing Jiaotong University, said autonomous driving will not be accident-proof, especially when there are other vehicles driven by humans on the same road.
"Once an accident happens, who should be held responsible for it? Automakers or software providers? Or the vehicle owner? How would insurance companies offer compensation for such accidents?" he said.
A fundamental shift in the auto industry first requires a thorough legal and regulatory framework to be put in place, he said.
Given the complexity involved, mobility service providers may be the first to be allowed to adopt the new technology at a commercial level, said industry insiders. For, it would be easier to regulate them, as no more than tens of thousands of cars would be involved, not millions of individual car owners.
So, it would seem Baidu has already done the math and thus invested in Uber, the world's most-valued car-hailing app.
"China faces some of the same challenges in implementing autonomous driving as other countries do. The transition period, where some vehicles are autonomous and others not, will be one common challenge. The main difference is in what the governments can do. In China, this will certainly be different－but not necessarily more difficult. In fact, for many reasons, we believe there may be more willingness to facilitate autonomous driving," Baidu said in an e-mail to China Daily.
But there is still one hoop Baidu needs to jump through before the driverless car goes into mass production－its cost.
Li Deyi, head of the Chinese Association for Artificial Intelligence, said cost is a critical factor for such cars. "There is no strong incentive for ordinary people to buy a 1 million yuan ($151,900) autonomous driving car. If it were up to me, I'd rather get a 200,000 yuan car and hire a good driver."