Tencent buys 5 percent stake in Tesla for $1.8B

Chinese internet giant forks out US$1.78 billion for a 5 percent stake in Tesla, days after the electric car maker says it is looking to raise funds to scale its business and bring its Model 3 to market.

Tencent Holdings has forked out US$1.78 billion for a 5 percent stake in Tesla, according to a document filed with the US Securities and Exchange Commission (SEC).

The announcement came days after the US electric car maker said it was looking to raise funds to scale its business and bring to market its US$35,000-priced Model 3. The company said it expected to secure more than US$1 billion through the sale of common stock and senior notes. Tesla said the funds injection would be used to boost its balance sheet and "reduce any risks associated with the rapid scaling of our business due to the launch of Model 3".

CEO Elon Musk, who also planned to acquire US$25 million of common stock, had said the launch of launch drive Tesla's finances "close to the edge". In addition, Tesla in February announced plans to build five Gigafactories to meet demands for solar panel and electric vehicle (EV) battery, as it moved towards its Model 3 debut.

With its investment, Tencent now held just under 8.17 million shares and had become Tesla's fifth-largest shareholder, according to Bloomberg, which reported that China contributed more than 15 percent of the car maker's total revenue last year.

In its 2016 earnings announced earlier this month, Tencent reported a 48 percent increase in revenue to US$21.9 billion, on operating profit of US$8.09 billion.

In December, the Chinese company partnered Beijing-based mapping company NavInfo and Singapore state-owned investment firm GIC to acquire a 10 percent share of mapping company, Here. As part of the deal, Audi, BMW, and Daimler reduced their indirect holding by 10 percent.

Here and NavInfo also established a joint venture to offer mapping services in China as well as services for autonomous vehicles. Tencent, which bought an 11 percent stake in NavInfo in 2014, added that it would explore tapping Here's location services for its platforms.

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