Chinese internet platform and AI company Baidu announced on Monday it will establish a company that produces intelligent electric vehicles (EV), teaming up with auto manufacturer Geely.

For the new company, Baidu will provide intelligent driving capabilities to power the passenger vehicles, while Geely will contribute its expertise in automobile design and manufacturing, Baidu said in a statement. 

"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. 

Thanks to the better-than-expected market recovery from the blow caused by the pandemic, China's new energy vehicle (NEV) industry continues to boom. NEV sales in China, which include electric, plug-in hybrid and fuel-cell vehicles, is expected to jump 40 percent in 2021 to 1.8 million units, the China Association of Automobile Manufacturers said in December.

The cooperation marks Baidu's significant expansion into auto-making, which has for years reiterated its Apollo open-source platform to help manufacturers build autonomous driving and connectivity into their products. The new venture with Geely is intended to push Apollo's adoption in more EVs.

At the time of publishing, Geely's shares cumulatively soared about 27 percent in Hong Kong in the last three trading days, since the rumors of the new venture started spreading, while Baidu gained about 15 percent in New York on Friday.