China's Tencent Holdings Ltd (0700.HK) has bought a 5 percent stake in U.S. electric car maker Tesla Inc (TSLA.O) 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 U.S. regulatory filing, provides Tesla with an additional cash cushion as it prepares to launch its mass-market Model 3. Tesla's shares were up 2.9 percent at $277.03 in midday trading on Tuesday, enabling it to rival Ford Motor Co (F.N) as the second-most-valuable U.S. auto company behind General Motors Co (GM.N).
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 Ltd (BABA.N) and Baidu Inc (BIDU.O).
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.
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 $46 billion market cap on Tuesday matched that 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 U.S. 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 U.S. rival.
Baidu has invested in Nio, as well as in Uber and Velodyne, a California maker of lidar sensors for self-driving cars. Alibaba's mobility investments include Didi and Lyft....MORE