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A sign is posted in front of the Nvidia headquarters in Santa Clara, California, May 10, 2018.
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Several Chinese electric carmakers are turning to U.S. chip giant Nvidia to power their semi-autonomous driving systems, as they ramp up competition with Tesla in the world's largest car market.
Chinese start-ups Xpeng and Nio are using the Nvidia Drive Orin chip in their latest cars. Baidu, which last year launched an auto unit called Jidu, announced plans to use the same Nvidia chip in its upcoming car, as well as Polestar, a brand under Chinese auto giant Geely.
With this chipset and accompanying software platform, Nvidia promises the capabilities for fully autonomous driving.
"For a Chinese EV company, or globally, there is not much to match what Nvidia can offer," said Bevin Jacob, partner at Shanghai-based investment and consulting firm Automobility.
However, these Chinese carmakers are not putting out fully autonomous cars. Instead, they are focusing on so-called advanced driver-assistancesystem, or ADAS. These are systems that allow the car to carry out some functions semi-autonomously, such as lane switching. For example, Tesla's ADAS is called Autopilot while Xpeng's system is Xpilot.
ADAS — along with other features like fast charging and range — are "key differentiators" in the high-end electric vehicle space, according to Aakash Arora, managing director and partner at Boston Consulting Group.
"Most EV models today compete in price segments where having ADAS is critical from a customer expectation perspective," Arora said. "Early adopters of EVs are also likely early technology adopters and value technology features more."
Tesla competition in China
Competition in China's electric vehicle market, which is expected to show strong growth again in 2022, is intensifying.
Nvidia is a beneficiary of this intense competition among China's EV makers.
Elon Musk's Tesla, which has a factory in Shanghai, sold a record number of China-made cars in December and its brand remains strong despite facing one of its worst public relations crises in the country last year.
The U.S. electric vehicle maker does not use Nvidia chips. Instead, it designs its own semiconductors to power its ADAS called the Full Self-Driving (FSD) chip.
Read more about electric vehicles, batteries and chips from CNBC Pro
While Tesla is investing in chip design, that's not realistic for all EV companies, particularly start-ups that are focused on ramping up production and getting cars into the hands of customers.
That's why they're turning to Nvidia for chips to power ADAS features to rival Tesla.
"Tesla has a clear and definable lead around FSD with Chinese EV players now aggressively partnering with Nvidia to close this perceived technology gap," Daniel Ives, managing director at Wedbush Securities, told CNBC by email.
"Nvidia has strong roots in the China market and further building out its auto chip business around FSD is strategically important."
