Chinese food delivery behemoth Meituan has raised $10 billion in a stock and convertible bonds sale, aiming to get a piece of the huge pie of autonomous-driving fields.

The Tencent-backed firm with a market valuation of $220 billion said it plans to use its new war chest to invest in autonomous delivery vehicles, delivery drones and other cutting-edge technology.

"Meituan will use most of the capital in updating its delivery system which currently relies on human drivers and will soon be unaffordable for the company as labor costs continue to rise in China," said Zhang Yi, head of consultancy iiMedia Research.

"It is making plans for its future in 5 to 10 years' time," he added.

In a record fundraising for the company, Meituan sold $6.6 billion in shares and gained roughly $3 billion in two-tranche convertible bonds. Another $400 million was raised by selling more shares to Tencent Holdings Ltd, its largest shareholder whose stake now stands at around 17 percent.

Meituan is piling into an already crowded pool, where automakers from U.S. leading firm Tesla to China's domestic upstarts Nio, Xpeng and Li Auto are battling for a slice of the world's biggest electric vehicle (EV) market.

Swedish carmaker Volvo Cars said on Monday it has signed an agreement to provide cars to the autonomous driving technology unit of China's top ride-hailing firm, Didi Chuxing, for its self-driving test fleet.

Last week, Huawei announced that it will invest $1 billion in its automotive business in 2021, with a focus on building components for smart vehicles, including self-driving software platforms.

Last month, Chinese handset maker Xiaomi also unveiled plans to invest about $10 billion over the next decade in manufacturing electric cars.

Search giant Baidu and Geely Automobile Holdings also announced a plan to build EVs together. For their joint company, Baidu will provide intelligent driving capabilities to power the passenger vehicles, while Geely will contribute its expertise in automobile design and manufacturing.

The biggest breakthrough and opportunities for the next decade will be in the automotive industry, as China adds 30 million cars each year and the number is growing. Even if Huawei does not tap the market outside China, the company could earn an average 10,000 yuan (about $1,539) from each car sold in China – that is already a very big business for Huawei, NIKKEI Asia cited Huawei's Rotating Chairman Eric Xu's remarks at the 18th Global Analyst Summit last week.

(With input from Reuters)