Tesla deal boosts Chinese presence in U.S. auto tech

Wed Mar 29, 2017 8:34am EDT
 
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By Paul Lienert

DETROIT (Reuters) - China's Tencent Holdings Ltd (0700.HK: Quote) has bought a 5 percent stake in U.S. electric car maker Tesla Inc (TSLA.O: Quote) 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 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 Co (F.N: Quote) as the second-most-valuable U.S. auto company behind General Motors Co (GM.N: Quote).

Tencent also could help the U.S. 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 Chief Executive Officer 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.

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: Quote) and Baidu Inc (BIDU.O: Quote).   Continued...

 
FILE PHOTO --  A Tesla car showroom is seen in west London, Britain, March 21, 2017.  REUTERS/Toby Melville/File Photo