The deal, which may be announced as early as next week, follows a spate of similar investments and tie-ups between technology firms and car manufacturers, particularly in China. Both conventional and electric carmakers are rushing to gain an edge, as features like autonomous driving and smart-mobility solutions transform vehicles.

Investor interest in newer technologies that create cleaner vehicles has pushed the valuations of electric vehicle makers, including Nio and Tesla, into the stratosphere. Companies like Hyundai Motor Co and its affiliate Kia Motors Corp have also received a bump after being linked to Apple’s self-driving car project.

QCraft was established in 2019 by executives who used to work at self-driving pioneers including Waymo, Tesla and Uber Technologies. It uses large-scale intelligent simulation systems and a self-learning framework for decision making to reduce the cost of developing autonomous-driving technologies.

Other backers include IDG Capital and Lenovo Capital. The minibuses using QCraft’s technology are in operation on open roads in cities including Suzhou, Shenzhen and Wuhan.

While small, the investment would mark ByteDance’s maiden bet in the car industry and an unusual foray outside its domain of artificial intelligence (AI) and social media. It is unclear whether the company has aspirations to get into the increasingly technologically sophisticated carmaking arena, though like other internet giants it has AI and entertainment services that could blend well with a new generation of hyper-connected vehicles.

China, the world’s biggest car market, wants smart vehicles with at least some automation to account for more than 50 per cent of new sales by 2025, according to a national technology road map laid out in November. In a policy initiative in December, the Ministry of Transport also emphasised the need to encourage technology developers to apply their learnings to public transport, with the aim of establishing a slew of demonstration sites across the country.