* Firms to also work on AI-assisted driving, explore investments
* Strategic pact follows Tencent investment in Tesla
* Guangzhou Auto shares up 5 pct, Tencent up 1 pct at record (Recasts and adds share reaction)
By Sijia Jiang
HONG KONG, Sept 19 (Reuters) - China's Tencent Holdings and Guangzhou Automobile Group Company Ltd have agreed to collaborate on internet-connected cars - a strategic pact that sent shares in Guangzhou Auto surging.
The development of self-driving cars and fast-changing technology have set in motion a flurry of alliances between internet giants and automakers. Earlier this year, Tencent bought 5 percent of U.S. electric car maker Tesla Inc for $1.78 billion.
Tencent and Guangzhou Auto will work together to develop internet-connected cars and artificial intelligence-aided driving, as well as explore investment in areas such as auto-related e-commerce, so-called new energy cars and auto insurance, the automaker said in a filing late on Monday.
Guangzhou Auto said it aimed to tap Tencent's expertise in mobile payments, social networking, big data and artificial intelligence. Tencent will also provide cloud services and other technical support.
Hong Kong-listed shares of Guangzhou Auto were trading 5 percent higher on Tuesday morning. Tencent gained nearly 1 percent to a record high.
Tencent has been a relative latecomer among China's largest tech firms to delve into the auto sector. E-commerce giant Alibaba Holdings has a joint venture with Shanghai-based auto maker SAIC Motor Corp Ltd, while Baidu Inc has been developing self-driving cars. (Reporting by Sijia Jiang; Editing by Edwina Gibbs)