Chinese Tech Company Buys Tesla Stake

Chinese tech giant Tencent purchased a 5 percent stake in Tesla Motors as the electric vehicle maker prepares to introduce its first mass-market car.

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Chinese tech giant Tencent purchased a 5 percent stake in Tesla Motors as the electric vehicle maker prepares to introduce its first mass-market car.

The Wall Street Journal reports that the minority stake is worth about $1.8 billion and that Tesla CEO Elon Musk's response could signal a strong partnership with the owner of the WeChat social networking platform.

"Glad to have Tencent as an investor and advisor to Tesla," Musk wrote on Twitter.

Analysts suggested that the deal could be a precursor to Tesla establishing its own factory in the world's largest auto market. U.S. car makers are often forced to partner with Chinese counterparts to build factories in the country and avoid a 25 percent tariffs on imported vehicles.

A Tencent filing indicated that the company acquired its stake both on the open market and through a recent stock offering as Tesla raises cash to scale up vehicle production.

The new Model 3 sedan, due later this year, will cost less than half the price of Tesla's current luxury electric vehicles and received more than 300,000 pre-orders. Musk hopes to produce 500,000 vehicles per year by 2018.

“Tencent’s success is partly due to our record of backing entrepreneurs with capital,” a Tencent spokeswoman told the Journal. “Elon Musk is the archetype for entrepreneurship, combining vision, ambition and execution.”

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