Detroit - China's Tencent Holdings has bought a 5 percent stake in US electric car
maker Tesla for $1.78 billion, the latest
investment by a Chinese internet company in the potentially
lucrative market for self-driving vehicles and related services.
Tencent's investment, revealed in a US regulatory filing,
provides Tesla with a deep-pocketed ally as it prepares to
launch its mass-market Model 3. Tesla's shares rose 2.7 percent
to $277.45 on Tuesday, closing in on Ford Motor as the
second-most-valuable US auto company behind General Motors.
Tencent also could help the US company sell - or even
build - cars in China, the world's largest auto market, analysts
said.
"It certainly is a strong chess move for Tesla," said Jeff
Schuster, senior vice president of forecasting for researcher
LMC Automotive, citing the cash infusion and "help in navigating
the Chinese market."
Tesla CEO Elon Musk on Tuesday tweeted:
"Glad to have Tencent as an investor and adviser to Tesla." Musk
did not say what he meant by "adviser" but in a separate tweet
he noted Tesla had "very few" Model 3 orders from China, where
the car has not been formally introduced.
The midsize Model 3 is due to go on sale later this year in
the United States.
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The deal expands Tencent's presence in an emerging
investment sector that includes self-driving electric cars,
which could enable such new modes of transportation as automated
ride-sharing and delivery services, as well as ancillary
services ranging from infotainment to e-commerce.
Those new technologies, and their potential to create new
business models and revenue streams in the global transportation
sector, have attracted billions in investment from China's three
tech giants - Tencent, Alibaba Group Holding and
Baidu.
In an investor note, Morgan Stanley auto analyst Adam Jonas
said on Tuesday that he "would not be surprised" to see Tencent
and Tesla collaborate in the development and deployment of some
of those technologies.
The White House did not immediately respond to a request for
comment on the Chinese investment in Tesla, but President Donald
Trump has been critical of US automakers and of China trade
policies.
Founded in 1998 by entrepreneur Ma Huateng, Tencent is one
of Asia's largest tech companies, best known for its WeChat
mobile messaging app. With a market capitalization of about $275
billion, it is roughly six times the size of 14-year-old Tesla,
whose $45 billion market cap on Tuesday was only $1 billion shy
of 114-year-old Ford.
Tencent was an early investor in NextEV, a Shanghai-based
electric vehicle startup that since has rebranded itself as Nio,
with US headquarters in San Jose, not far from Tesla's Palo
Alto base. Tencent also has funded at least two other Chinese EV
startups, including Future Mobility in Shenzhen.
In addition, Tencent has invested in Didi Chuxing, the
world's second-largest ride services company behind Uber, and in
Lyft, Uber's chief US rival.
Baidu has invested in Nio, as well as in Uber and Velodyne,
a California maker of laser-based lidar sensors for self-driving
cars. Alibaba's mobility investments include Didi and Lyft.
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As Tesla is doing, many of the start-up companies backed by
Tencent, Baidu and Alibaba are developing self-driving systems
that eventually could be introduced in commercial ride-sharing
fleets in the United States and China after 2020.
Tencent maintains a US office in Palo Alto, in the heart
of California's Silicon Valley. Beijing-based Baidu and
Hangzhou-based Alibaba also maintain offices in Silicon Valley.
Tencent owns about 8.2 million shares in Tesla, the carmaker
said. It is the fifth-largest shareholder, behind Musk and
investment companies Fidelity, Baillie Gifford and T. Rowe
Price.
To help fund Model 3 production, Tesla raised about $1.2
billion by selling common shares and convertible debt earlier
this month. Tencent said its shares were acquired as part of the
early March equity sale and on the open market.
Musk had a stake of about 21 percent as of December 31.