Tesla Hopes to Shift into High Gear with Chinese Investment
April 10, 2017
Elon Musk’s Tesla electric car company recently received a $1.8 billion cash infusion from Chinese powerhouse Tencent. This represents more than 8 million shares or a 5% ownership stake for Tencent, making it the fifth largest shareholder after Musk, Fidelity, Baillie Gifford and T. Rowe Price.
Tencent’s portfolio includes the WeChat messaging app, video games and artificial intelligence technologies. It has also taken investment positons in Snap Inc. and Lyft. It is considered one of the “Big 3” Chinese technology companies, along with Alibaba (e-commerce) and Baidu (web services). Tencent’s market cap is an impressive $275 billion.
Tesla wanted a cash infusion in order to launch its upcoming Model 3 electric car. Expected to go on sale this year, the Model 3’s $35,000 price tag could make it more of a mass market vehicle than earlier models.
Tesla currently has showrooms in several Chinese cities, including Beijing and Shanghai. Tesla’s exports to China were 15% of its revenue in 2016 and there is thought to be room for significant growth. Globally, Tesla sells approximately 80,000 electric cars annually but hopes to reach 500,000 per year by 2020.
Tesla just received some additional good news: First-quarter 2017 vehicle deliveries jumped 69% from Q1 2016. In fact, Tesla’s market cap increased to $46.5 billion, surpassing Ford's $45.7 billion.
Tencent’s investment in Tesla will help increase brand awareness in each other’s country. Tesla vehicles could also benefit from Tencent’s foray into artificial intelligence. Tencent, Alibaba and Baidu are leveraging their respective technologies to enter the self-driving car market.