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Tencent and Nio Inc’s news has excited investors and potential users, and the shares of Tencent in Hong Kong closed with a gain of 5.85%.
Chinese multinational tech giant Tencent Holdings Ltd (HKG: 0700) has inked a functional partnership with the electric automaker, Nio Inc (NYSE: NIO) that will see both companies develop powerful driverless cars. For Nio, the deal is a very promising one as it seeks to enhance its product line in the areas of high-definition mapping and autonomous driving.
As a mutually beneficial partnership, Tencent will draw on the prospects of the association to diversify its core business offerings beyond gaming and the cloud. Both companies will also capitalize on the latest focus of the Chinese government to encourage the production of energy cars with enhanced functionalities.
The diversification of focus is important for both companies riding on the broader crackdown of China on homegrown tech firms in the past year. Drawing on the continuous incidence of COVID-19, China has been enforcing its zero-COVID policies which have given a number of companies major headwinds in their productivity year to date.
Amidst the growing regulatory strain, Nio is trying to set itself apart from its top competitors in the EV industry with Tencent’s backing. The automaker will utilize Tencent’s cloud for data storage and training of algorithms for self-driving cars. Despite its current advances in this niche, the integration of such high-powered cloud infrastructure service providers as Tencent will enable large amounts of data to be processed in real-time, thus enhancing the inherent development of self-driving systems.
Though it remains heavily impacted as the global supply chain is still under so much strain, Nio has impressively delivered as many as 31,407 vehicles in the third quarter, making the new partnership with Tencent one that is worth watching as it evolves in the near term.
Tencent and Nio Inc’s news has excited investors and potential users, and the shares of Tencent in Hong Kong closed at 285.80 HKD atop a rate of gain of 5.85%. Nio’s shares in New York have also retraced their bearish close on Monday and are up 4.15% to $10.54 in the Pre-Market.
Tencent and Nio Trailing Alibaba and Xpeng
It is becoming a trend for the dominant tech companies in Chinese closing partnership deals with promising homegrown electric automakers. Just as Tencent and Nio are exploring this mutual relationship, ecommerce giant Alibaba Group Holding Ltd (HKG: 9988) and Xpeng Inc (NYSE: XPEV) also inked a similar partnership back in August this year.
The Alibaba-Xpeng relationship is also centered on training driverless cars, but in this case, through a computing center that was jointly opened by both firms.
The electric vehicle industry is considered a very lucrative outfit in the push to wade off climate change. Partnerships between industry giants as we have seen can help accelerate the transition into the sustainable future that governments including China’s are encouraging now.