Tesla Deal Increases Presence of China in Auto Tech in U.S.

Tencent Holdings based in China acquired a stake of 5% in Tesla Inc. the United States based maker of electric cars for a price of $1.78 billion. This is the latest investment the internet company from China has made in the potentially highly-lucrative market for self-driving cars and services that are related.

The investment by Tencent revealed in a regulatory filing in the U.S., provides Tesla with an ally that has deep pockets as it readies to launch its Model 3 to the mass market.

Shares of Tesla were up over 2.7% to reach $277.44, nearing Ford Motor Co as the No. 2 most valuable auto company in the U.S. behind leader General Motors Co.

Analysts said the Chinese based Internet giant could also help Tesla sell and possibly manufacture vehicles in China, the largest auto market in the world.

One analyst called the move a strong chess play for Tesla due to the cash infusion it gives the automaker and the help it will receive in navigating the market in China.

Tesla CEO Elon Musk tweeted on Tuesday that he was pleased to have Tencent as an advisor and investor to Tesla.

Musk did not make any mention of the term advisor he used in his tweet, but in another tweet he said that Tesla had just a few orders for its Model 3 in China, where the vehicle had yet to be formally introduced.

The Model 3, which is a mid-size car, will go on sale during the latter part of this year across the U.S.

This deal expands the presence of Tencent in a growing investment sector which includes electric cars that are self-driving that could possibly enable new transportation modes such as automated delivery and ride-sharing services.

The new technologies and the potential to create new revenue streams and business models in the worldwide transportation sector, have attracted investments in the billions from three tech giants in China – Tencent, Baidu and Alibaba.

An analyst with Morgan Stanley said that it would not surprise him to see Tesla and Tencent collaborate in developing and deploying some of the technologies.

Founded during 1998 by Ma Huateng an entrepreneur, Tencent is one of the largest tech businesses in Asia. It is known best for its mobile messaging app WeChat.

Its market capitalization is approximately $275 billion which is close to six times that of Tesla at $45 billion.

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