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Tencent Cashes in on Tesla's Startup Rival NextEV

| Sep 05, 2015 08:12 AM EDT

Electric vehicles are a nascent sector in China, sparking interest from various Chinese firms.

Tencent Holdings Ltd. has invested on a Chinese version of international market leader Tesla Motors Inc. in a new initiative to penetrate the nascent electric car market.

The wealthy company is part of a group of investors that cashed in on NextEV Co. Ltd., a manufacturer of electric cars in Shanghai, said Reuters in its report.

The startup firm is already targeting employees from global car manufacturers, a NextEV spokeswoman told Reuters without sharing the specifics of the investment.

Ford Motor Co.'s previous president for its European branch has been hired to be NextEV's co-president.

The spokeswoman added that the company plans to release its first model in 2016, which could accelerate from 0 to 100kmph within just 3 seconds. Tencent did not comment on the development.

NextEV was established a year ago and has offices in the U.S. and Europe, according to its official LinkedIn account.

The report followed after China's triumph in overthrowing the U.S. as the biggest market for new-energy vehicles. In the first half of 2015, over 72,000 green cars were sold in China, which was 20,000 units more than the numbers in the U.S., according to data from the China Association of Automobile Manufacturers.

The venture is also the most recent effort by Tencent to join in on the electric car boom. In March, Tencent inked a partnership with Hon Hai Precision Industry Co. Ltd. and luxury car distributor China Harmony Auto Holding Ltd. to produce and sell smart electric cars.

Tencent's two major competitors, Alibaba Group Holding Ltd. and Baidu Inc., are also looking into the electric vehicle sector. They have partnered with SAIC Motor Corp. Ltd. and BMW, respectively, on similar ventures.

Forrester Research Inc.'s senior analyst Gene Cao said that it is highly feasible for China to have a local electric carmaker to go against Tesla.

"Unlike the U.S.-based company which thrives on pure technological edges, Chinese Internet heavyweights have little or no automotive background. But they are veterans in consolidating resources and good at coming up with new business models," Cao said.

"Their entry will attract even more cash and talent, which is key for the research and development of cars powered by renewable energy," he added. "A globally competent Chinese electric carmaker is likely to emerge in the next few years."

Earlier this year, the government included new-energy vehicles among the 10 key industries in its national strategy "Made in China 2025," and anticipates its sales to reach over two million units by 2020.

Analysys International's Pan Wei said that the following of electric vehicles is based on the huge number of drivers.

"Smart electric cars can better digitize the behavior of China's more than 100 million drivers," Pan said. "This will help Internet companies collect a huge amount of data, profile their preferences and thus generate more profit from each user."

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