Daimler and Tesla Motors Announce Strategic Partnership To Make Electric Cars

By Scott Doggett May 19, 2009

The German Auto Giant Acquires a 10 Percent Equity Stake in the California EV Maker

D-&-T-emblems.jpg By Scott Doggett, Contributor

Daimler AG, parent company of Mercedes-Benz, inventor of the gasoline-powered automobile, and Tesla Motors, the California newbie that remains the only automaker currently producing highway-capable battery-electric cars, announced today that they will partner to manufacture electric vehicles.

As part of the agreement, Daimler has acquired a 10 percent equity stake in the San Carlos, California-based EV maker.

The deal provides Daimler with advanced lithium batteries, a seat on Tesla's board of directors and the know-how needed to bring an electric car to market "at the highest possible speed," Thomas Weber, a member of the board of Daimler AG, said at a news conference at the Mercedes-Benz Museum in Stuttgart today.

In exchange, Tesla will receive "a double-digit million sum," Weber said, and the parts and engineering expertise it needs to mass produce its second plug-in battery-electric vehicle, the Model S sedan. Tesla's $109,000 Roadster is the only highway-capable production plug-in battery-electric vehicle on the market.

"Tesla brings expertise in the battery-electric front," Tesla CEO Elon Musk said the news conference, which was carried live via Webcast. "Daimler brings expertise in everything else. This will be a very productive relationship where both Tesla and Daimler benefit."

The announcement comes as the Obama administration is due to propose stricter fuel-economy standards in a bid to reduce automotive greenhouse-gas emissions.

Automakers have been in a race to tap the market for plug-in battery-powered vehicles.

Daimler has spent years focused on the research and development of emission-free vehicles and electric batteries. Weber said the company's "strategic partnership with Tesla is an important step to accelerate the commercialization of electric drives globally."

Electric-car makers, meanwhile, have hit some speed bumps amid the economic downturn.

Tesla recently had to push back the debut of its Model S four-door sedan. The company now expects to begin producing the Model S in late 2011. The vehicle, with an expected $57,400 price tag, originally had been due out in 2010.

Last month, Daimler reached an agreement with Chrysler and owner Cerberus Capital Management to exit its 19.9 percent stake in the company.

Today's announcement is an expansion on a deal Daimler brokered with Tesla earlier this year to provide 1,000 battery packs for the German automaker's forcoming Smart EV. Weber said today that Daimler will have 1,000 Smart EVs on the road by the end of this year.

Those vehicles will be dedicated to test fleets to refine the vehicle, which Weber said will go into mass-production in 2012.

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