Chinese Internet Giant Buys 5 Percent of Tesla for $1.8 Billion

by Joe Romm –

Tesla’s market value surge signals a booming future for electric vehicles — globally.

On Monday, Tesla accelerated past Ford Motors to become the number two U.S. automaker by market capitalization — the total stock market value of the company.

That puts Tesla’s market cap ($48 billion) within sight of General Motors’ ($51 billion).

Via MarketWatch

The stock surge reflects the market’s view that the future for cars is electric. After all, Ford sold nearly 240,000 cars in March, whereas Tesla reported on Sunday that its total deliveries in the whole first quarter were only 25,000 cars.

Still, Tesla’s 2017 Q1 sales were up nearly 70 percent over 2016 Q1 sales. And the market likes to bet on growth.

Rapid and ongoing drops in battery cost mean we are just at the start of the EV revolution. As Navigant Research reported in January, “more than 37 million plug-in electric vehicles are expected to be in use in 2025,” and those EVs will be “cost competitive” without subsidies.

Bloomberg New Energy Finance

No surprise, then, that Elon Musk’s company has been on a tear. In late March, the Chinese company Tencent Holdings — one of the five largest internet companies in the world by both revenue and market cap — bought a 5 percent stake in Tesla for $1.8 billion.

“Tencent’s passive stake is not only a vote of confidence in Elon Musk and the future of EVs,” as an auto analyst at Barclays told clients last week, “but also may help in accessing the Chinese market.”

The Chinese have been betting heavily on batteries and EVs, which is why they surpassed us in total sales back in 2015.

CREDIT: Wikipedia

Beijing is now aiming for a 10-fold increase in sales by 2025, offering subsidies up to 60 percent of an EV’s cost. So any EV company that wants to thrive will need a Chinese partner.

Europe is also betting big on EVs. The Guardian reported last fall that a draft European Union directive, “expected to come into effect by 2019,” requires all new or remodeled houses to have an EV charger. Norway’s transportation minister says it is “realistic” that sales of new internal combustion (IC) cars could end by 2025. EVs may win on straight economics then, but the country — and others, including Germany and India — have been considering outright bans of IC cars.

Tragically, we are the only major country in the world not adopting aggressive policies to push EVs.

Last month, the blinkered Trump administration began an effort to roll back the tough fuel-economy standards that apply to model years 2022–2025 — standards that were aimed at speeding the U.S. transition to super-efficient and electric vehicles (EVs).

The bottom line is that China, Europe, and the stock market all disagree with team Trump: The future belongs to cars that run on electricity, not oil.

Reprinted with permission from Think Progress, a branch of The Center for American Progress