Tencent Holding’s finally received their self-driving car license. Despite this, the company just experienced a large drop in share value to the tune of $78-billion USD.
The Chinese company Tencent Holdings obtained a test license for China’s Shenzen City on May 14th. But the test license plate and concerns about autonomous driving crashes aren’t Tencent’s biggest problems right now.
How will stock values affect Tencent’s bid on the self-driving car market?
A Tale of two Chinese Competitors
Across the board, China wants to bolster autonomous driving programs. Since there are so many U.S. competitors (Tesla, Uber, Waymo, etc.), this comes as no surprise.
The test license plate grants Tencent the ability to test their self-driving car on certain roads in Shenzen. Tencent began testing its autonomous driving system in 2017 in lieu of a homegrown competitor’s success. This meant they were the leading autonomous driving company in the area, for a while.
Shortly afterward, Baidu, another Chinese tech giant, funneled $1.5-billion USD into their Apollo autonomous car initiative. Sadly for Tencent, Baidu sits at around $275 USD in their NASDAQ valuation as of the writing of this article.
Tencent Holdings, however, sits at a $52 USD at their current valuations. In fact, people expect Wednesday’s numbers to be even worse for Tencent Holdings. Experts attribute the drop in value to Tencent’s “spending spree” on more diverse investments.
Investors responded to Tencent’s increased spendings this year with concern.
This ultimately led to the $78-billion USD value drop since January of this year. Although part of the problem, their autonomous car failings are not the entire story.
Statistics Versus Projected Outlooks for Tencent Holdings
“The short-term weak performance in PC games coupled with larger payment-related subsidies and weaker ad seasonality may affect the company’s margin,” said the China International Capital Corp. analyst.
But last year, Tencent handily won the video game profits race by more than $8-billion USD to top competitor SONY.
Tencent has investments in many major games such as League of Legends, Player Unknown’s Battlegrounds, and even Fortnite. The company even bought Riot Games, owning League of Legends outright since 2015.
Shifting into the self-driving car market may assuage investor concerns moving forward.