Chinese tech company Tencent bought a 5% stake in Tesla Inc.
Chinese technology giant Tencent Holdings Ltd. has bought a 5% stake in electric car and solar firm Tesla Inc., according to a regulatory filing submitted Tuesday.
The $1.8-billion investment gives one of China’s most valuable companies another foothold in a growing industry and provides Elon Musk ’s Tesla a much-needed infusion of cash as it prepares to introduce its first mass-market sedan, the Model 3.
Tencent now owns 8.17 million shares of Palo Alto-based Tesla, making it the company’s fifth-largest shareholder, according to Nasdaq .
Tencent’s emergence as a major shareholder could strengthen Tesla’s position in China, where it has seen its car exports surge to 11,839 vehicles in 2016, nearly four times more than in 2015, according to JL Warren Capital.
“A Chinese shareholder such as Tencent could well improve the potential for marketing in China,” said Daniel Rosen, a partner at the Rhodium Group.
The investment comes weeks after Tesla said it needed to raise up to $1.15 billion by selling new stock and convertible securities to shore up its balance sheet for the Model 3. The $35,000 vehicle represents Tesla’s biggest attempt yet to shed its status as a luxury-only brand, but questions linger about the company’s ability to ramp up production into the hundreds of thousands by the end of 2018.
Analysts say that Tencent’s interest will help allay some of those concerns about the still unprofitable automaker.
“I would take that as a vote of confidence in Tesla’s plans,” said Efraim Levy, an analyst at CFRA.
