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Ford, Chinese search giant invest $150 million for self-driving car

California-based Velodyne, which makes the sensors that can act as a self-driving car's 'eyes' on the road, announcing the funding on Tuesday.

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Kaushik Raghu, a senior staff engineer at Audi, is reflected in the passenger side visor mirror while demonstrating an Audi self driving vehicle in Arlington, Va., in July. Carmaker Ford and search engine giant Baidu invested $150 million in Velodyne, which makes sensors known as lidar that can function as a self-driving car's 'eyes' on the road.

Pablo Martinez Monsivais/AP/File

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As the race to put self-driving cars on the road heats up, Ford Motor Company and Chinese search engine giant Baidu are investing in a company that makes one of the car's core technologies.

Velodyne, a California-based company that makes puck shaped lidar (for light detection and ranging) sensors, announced Tuesday that it had secured $150 million in funding from the two companies.

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As a slew of companies have moved into testing their own autonomous vehicles, Ford argues that increased investments in the technology could lead to a large-scale transformation in how cars are made.

"It's a very exciting time in the industry," Mark Fields, Ford's chief executive, said on CNBC's "Squawk Box" on Tuesday. "Our view is autonomous vehicles could have just as much [of an] impact on society as Ford's moving assembly line did 100 years ago."

Lidar could be a critical piece of that path.

Also known for its use in architectural modeling, the technology works by sending out millions of tiny bursts of light every second. Though invisible to the human eye, the light bounces off buildings, objects, and people, producing detailed renderings of an environment that combine with cameras and other sensors to act as a self-driving car's "eyes" on the road.

Mike Jellen, Velodyne's president, told USA Today the company currently works with 25 self-driving car programs. One notable exception is electric carmaker Tesla, which doesn't use the technology in cars that use its Autopilot mode.

With two to four lidar sensors used per car, the company could profit handsomely if self-driving cars become commercially available. "Annual unit sales of 200 to 300 million is realistic," Mr. Jellen said.

The company, which originally began as a maker of audio equipment, particularly emphasizes its technology's potential to increase safety on the road.

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"We want the cost to be low enough to be used for all cars. We envision a safer world for the millions of automotive drivers across the globe," Marta Hall, Velodyne’s president of business development, said in a statement.

By investing in lidar technology, Ford and Baidu are also taking aim at their rivals.

Baidu, sometimes known as the "Chinese Google," is mentioned less frequently in discussions of self-driving cars than its American counterpart. In December 2015, however, the company said that its first fully self-driving car had navigated a nearly 20-mile route, as Fortune reports. Senior vice president Jing Wang said in June that Baidu hoped to mass-produce the cars by 2021. It will also test them in the United States, The Wall Street Journal reported.

Many carmakers say autonomous vehicles could especially prevent accidents caused by human error. But some have noted that lidar technology has its own quirks, particularly around mirrored surfaces.

Consider the example of someone wearing a T-shirt with a stop sign printed on it, Illah Nourbakhsh, a professor of robotics at Carnegie Mellon University, told The New York Times Magazine in November 2015.

"If they're outside walking, and the sun is at just the right glare level, and there's a mirrored truck stopped next to you, and the sun bounces off that truck and hits the guy so that you can't see his face anymore – well, now your car just sees a stop sign."

The chances of that actually occurring are highly unlikely, Professor Nourbakhsh told the magazine, "but the problem is we will have millions of these cars. The very unlikely will happen all the time."

The deal with Velodyne comes amid a dizzying array of carmakers and tech companies teaming up and making purchases in a bid to be the first to make a commercially available self-driving car.

Ford has also ramped up its investments in other technologies that could aid its focus on self-driving cars. In May, the automaker invested $182 million in cloud services company Pivotal, and has funded mapping startup Civil Maps, USA Today reports.

On Tuesday, the carmaker announced it would double its staff in Palo Alto, Calif., while also expanding its labs and offices in the city as it seeks to compete with rivals such as Google and GM.