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Tesla Deal to Boost Chinese Share in US Auto Industry

Chinese Tencent has bought stake in Tesla Motors.

Chinese internet company Tencent Holdings Ltd has just made a SGD 2.48 billion investment in Tesla, buying a 5% share of the electric car company. The purchase was revealed in a US regulatory filing, and means Tesla will have a new partner with deep pockets, on the cusp of releasing its new affordably priced Model 3 car. As a result of the purchase, Tesla’s shares rose 2.7 percent to USD 277.45 (SGD 386.86), creeping up on Ford’s spot as second most valuable car manufacturer in America after General Motors.

Tencent could provide an open door for Tesla to approach the Chinese market and sell their cars there. “It certainly is a strong chess move for Tesla,” said Jeff Schuster, senior vice president of forecasting for researcher LMC Automotive. Tesla’s CEO, Elon Musk, tweeted in response to the deal “Glad to have Tencent as an investor and adviser to Tesla.” What he meant by adviser remains to be seen, but considering that the company has received only a few orders in China, it’s possible he’s hoping the company will aid in Chinese sales.

Tencent isn’t the first company to make such an investment. There is a growing investment sector into electric cars and self-driving vehicles, spearheaded by China’s three tech giants, Tencent, Alibaba Group, and Baidu, Inc. The Chinese tech industry sees the field as a promising potential for new business models and revenue streams, as automated ride sharing, deliveries and more creep closer to reality. Morgan Stanley auto analyst Adam Jonas has said that he “would not be surprised” if Tesla and Tencent collaborated on developing such business models.

Tesla’s market in China isn’t huge, but perhaps with the Tencent deal, new doors will open.

Ma Huateng founded Tencent in 1998, and it has since grown to be one of China’s largest tech companies, best known for its WeChat mobile messaging app. It is roughly six times larger than Tesla, with a capital of SGD 383 billion. Tencent was an early investor in Chinese electric car company NextEV, which has since rebranded itself as Nio and moved headquarters to San Jose, a short distance from Tesla’s own Palo Alto headquarters.

source: Reuters

David F.
A grad student in experimental physics, David is fascinated by science, space and technology. When not buried in lecture books, he enjoys movies, gaming and mountainbiking

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