China’s Tencent announced it has bought a five-percent stake in Tesla on Tuesday, and it spells big news for artificial intelligence. The internet giant has made no secret of the fact that it wants to enter the self-driving car space, and with Tesla yet to launch its autonomy-focused Model 3 in China, it represents the perfect time for Tencent to get involved.
Tencent has clear ambitions to move beyond its product-based focus that has made its fortune. The company’s WeChat app is immensely popular, but now it wants to innovate. Company chairman Ma Huateng named self-driving cars as one such area ripe for investment.
“We want to transform into a technology-driven company,” Tencent research unit director Zhang Tong told Bloomberg last week. “We’ve reaped the benefits of a large population, now we need to use technology and A.I.”
Tencent will act not just as an investor, placing $1.8 billion into Tesla in return for its passive stake, but also as an advisor. The car maker has historically struggled to crack China, but its fortunes turned around last year when it made $1 billion in revenue, tripling the figure from the previous year and accounting for over 15 percent of revenue.
“Glad to have Tencent as an investor and advisor to Tesla,” Elon Musk said on Twitter on Tuesday. He also revealed that the company has received “very few” Model 3 orders in China, as it has yet to release the car in the country.
Tesla is in the place Tencent wants to get to. The company’s in-house Autopilot system provides semi-autonomous driving, with plans to enable cross-country autonomous driving by the end of the year. The company will collect data from current drivers to improve the system using A.I., something Morgan Stanley’s Adam Jonas believes could make the cars more valuable than other used vehicles.
The Model 3 will take this focus to the next level. The car has been built with autonomy in mind: the car lacks a speedometer on the driver’s side, as Musk claims it will be less necessary in an autonomous vehicle.
The Chinese government is currently making a strong push for electric vehicles in the country, aiming for five million electric vehicles by 2020. But while Tesla has found success with its Model S and X offerings, the $35,000 Model 3 could effectively compete with the $23,000 Chery eQ vehicle and others like it, cars that have proven popular with cash-conscious consumers.
Tencent owns a stake in a company that’s about to launch a very competitive autonomous car in its home country, and it’s well-equipped to make the most of it.