Chinese Tech Giant Tencent Buys 5 Percent Stake in Tesla for $1.78 Billion

Mar 29, 2017 10:24 AM EDT | Yen Palec

Electric car manufacturer Tesla recently received a much needed financial backing from Tencent. Reports claim that the Chinese tech giant bought a 5 percent stake of Tesla for $1.78 billion. This latest investment from Tencent boosts the Chinese firms' presence in the American tech market.

Tencent's investment in Tesla was revealed in a recent regulatory filing, according to Reuters. The investment adds a much-needed cash flow to Tesla, which has been on a spending spree lately in order to boost its production facilities in preparation for the mass-market production of the much-hyped Model 3.

With its recent investment in Tesla, Tencent is diversifying its portfolio in the US tech market. The Chinese tech giant has invested on several tech concerns, including self-driving cars. Many analysts said that this could potentially create new business models for both companies involved.

In a tweet shared following the deal, Tesla chief executive officer Elon Musk shared, "Glad to have Tencent as an investor and adviser to Tesla."

Musk did not elaborate as to how Tencent will serve as an "adviser" to Tesla. Nevertheless, many tech analysts said that this latest deal could mean that Tesla and Tencent can work together in the development and deployment of electric and self-driving cars.

Tencent is part of a trio of Chinese tech giants which have invested billions of dollars into the growing electric and self-driving car market. Two of these companies, Alibaba and Baidu, have also started developing their own technologies and have struck various partnership deals with both motoring and tech companies in order to advance their research.

According to CNBC, Tencent has investments in Didi Chuxing, the world's second-largest ride-hailing service with its main operation centered in China. Baidu has investments in Uber, and Alibaba has investments in Didi Chuxing and Lyft.

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