Tencent Holdings acquired a 5 percent stake of Tesla Motors for $1.78 billion

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Tesla Inc, the California-based electric carmaker, said Chinese tech giant Tencent Holdings Ltd acquired a 5 percent stake for $1.78 billion.

The purchase, revealed in a U.S. regulatory filing, pushed Tesla’s stock higher in early trading, making it the second most valuable U.S. auto company ahead of Ford Motor Co but behind General Motors Co, reports Reuters.

The deal gives Shenzhen-based Tencent a growing presence in the rapidly expanding future mobility sector, with investments in U.S. and Chinese startup companies that provide ride sharing services and are developing self-driving electric vehicles.

A sign of Tencent is seen during the third annual World Internet Conference in Wuzhen town of Jiaxing, Zhejiang province, China

Tencent’s investment also provides Tesla with an additional cash cushion as it prepares to boost production volume and launch its new Model 3. Tesla’s shares were up 2.6 percent at $277.19 in early trading.

Founded in 1998 by entrepreneur Ma Huateng, Tencent is one of Asia’s largest tech companies, best known for its WeChat mobile messaging app. With a market capitalization of about $275 billion, it is roughly six times the size of Tesla, whose $46-billion market cap on Tuesday topped that of 114-year-old Ford.

Tencent and fellow Chinese tech giants Alibaba Group Holding Ltd and Baidu Inc have invested billions in mobility startups. The services being developed by those newcomers promise to transform the global transportation landscape while providing significant new revenue streams to providers of mobile services.

Tencent was an early investor in NextEV, a Shanghai-based electric vehicle startup which since has rebranded itself as Nio and whose U.S. headquarters in San Jose is not far from Tesla’s Palo Alto base. Tencent also has funded at least two other Chinese EV startups, including Future Mobility in Shenzhen.

In addition, Tencent has invested in Didi Chuxing, the world’s second-largest ride services company behind Uber, and in Lyft, Uber’s chief U.S. rival.

Baidu has invested in Nio, as well as in Uber and Velodyne, a California maker of lidar sensors for self-driving cars. Alibaba’s mobility investments include Didi and Lyft.

As Tesla is doing, many of the mobility startup companies backed by Tencent, Baidu and Alibaba are developing self-driving systems that eventually could be introduced in commercial ride sharing fleets in the U.S. and China after 2020.

Tencent maintains a U.S. office in Palo Alto, in the heart of California’s Silicon Valley. Beijing-based Baidu and Hangzhou-based Alibaba also maintain offices in Silicon Valley.

Tencent owns about 8.2 million shares in Tesla, the carmaker said. Tencent is now the fifth-largest shareholder in Tesla, behind Elon Musk and investment companies Fidelity, Baillie Gifford and T. Rowe Price. Elon Musk-led Tesla raised about $1.2 billion by selling common shares and convertible debt earlier this month.

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