Tesla deal boosts Chinese presence in US auto tech

Tesla Chief Executive, Elon Musk enters the lobby of Trump Tower in Manhattan, New York

Tesla Chief Executive, Elon Musk enters the lobby of Trump Tower in Manhattan, New York

Published Mar 29, 2017

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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.

Read also:  Ex-Tesla manager seeks $4bn for battery plant

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.

Read also:  Tencent misses estimates

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.

REUTERS

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