Baidu, Inc (BIDU) said Sunday it will form an intelligent electric vehicle (EV) company and forge a strategic partnership with Volvo parent Geely Automobile Holdings Limited (GELYY).

What Happened: The Beijing-based internet firm, best known for its eponymous search engine, said it plans to establish a separate company that will make EVs.

Baidu will provide the intelligent driving capabilities to power the EVs for the new venture and the Chinese automaker will pitch in with design and manufacturing expertise.

“China has become the world's largest market for EVs, and we are seeing EV consumers demanding next-generation vehicles to be more intelligent,” said Robin Li, co-founder, and CEO of Baidu.

“We believe that by combining Baidu's expertise in smart transportation, connected vehicles, and autonomous driving with Geely's expertise as a leading automobile and EV manufacturer, the new partnership will pave the way for future passenger vehicles.”

Why It Matters: Baidu is looking to raise $3.5 billion from a secondary listing on the Hong Kong market. 

The Chinese internet giant already has its own navigation system app and voice assistant technology called DuerOS and is already working on developing autonomous driving technology.

Chinese EV market continues to grow thanks to government support in the form of subsidies and charging infrastructure, according to CNBC.

Pure EV sales increased 4.4% from January to November compared with a year earlier even though overall passenger car sales fell 7.6% in the same period, as per China’s Ministry of Industry and Information Technology, as cited by CNBC.

The Asian nation has no dearth of emerging EV companies such as Li Auto Inc LI, Xpeng Inc XPEV, and Nio NIO, who all compete for market share against market leader Tesla Inc TSLA, which has a factory in Shanghai.

Price Action: Baidu shares closed nearly 15.6% higher at $240.25 on Friday and fell 0.4% in the after-hours session. On the same day, Geely OTC shares closed almost 17.4% higher to $85.64.