Tech giant Tencent’s acquisition of a 5% stake in Tesla represents the latest investment by a Chinese tech company in automotive technology.
The purchase of 8.17 million shares in the American electric carmaker makes Tencent one of its biggest shareholders. A diverse internet conglomerate, Tencent’s businesses include online games and chat services, such as the popular WeChat mobile app. The deal with Tesla represents the latest in a series of investments by Chinese tech companies in the burgeoning market for self-driving vehicles. More broadly, it expands China’s global role in automotive technology.
This emerging investment sector includes self-driving electric cars, which could enable new modes of transportation, such as automated ride-sharing and delivery services. The potential of these technologies to create new types of businesses within the global transportation sector, as well as the technologies themselves, are attracting billions in investment from China’s three tech giants, Tencent, Alibaba and Baidu. Many of the start-ups they back are developing self-driving systems.
Tencent was an early investor in NextEV (now called NIO), a Shanghai-based electric vehicle start-up which has its US headquarters in Silicon Valley, not far from Tesla’s. Tencent has also funded at least two other Chinese EV start-ups, including Future Mobility. Additionally, the deep-pocketed company has invested in Didi Chuxing, the world’s second-largest ride hailing company after Uber, and in Lyft, Uber’s rival in the US.
For Tesla, the capital infusion comes at a time when the company is gearing up for production of its first mass-market electric car, the Model 3. Thus far in its 14-year history, Tesla has focused on higher-end electric vehicles starting at around $91,000. Launching the Model 3 will entail a major increase in production. The company expects to make 5,000 Model 3s a week in the fourth quarter, and 10,000 a week at some point in 2018, the New York Times reports.
Analysts say Tencent could help Tesla sell or even build cars in China, which is the world’s biggest automotive market. “It certainly is a strong chess move for Tesla”, said Jeff Schuster, Senior Vice President of Forecasting for research firm LMC Automotive, who suggested Tesla will also receive “help in navigating the Chinese market”. Morgan Stanley’s Global Head of Auto Research, Adam Jonas, said he “would not be surprised” if Tencent and Tesla collaborated on emerging technologies.