Daimler picks up stake in electric-vehicle manufacturer Tesla

20 May 2009

German car maker Daimler AG has acquired a 10-per cent stake in Silicon Valley electric-vehicle start-up Tesla Motors Inc in a move that will boost its presence in the field of alternative drive technologies.

With the investment, Daimler also gets a seat on the board of the venture capital-backed US company. The company declined to put a figure to the amount but said that the deal was worth a sum in double-digit million euros. Tesla's investors are expected to endorse the deal which not only brings the support of an established auto maker but also nets a partner with resources and expertise in marketing and technology.

Tesla has been waiting for some $350 million in loans from the US government for setting up a new manufacturing facility, probably in Southern California. It has it flagship store in the Westwood area of Los Angeles.

The fall in gasoline prices coupled with the recession has hit the company's promotion efforts of its vehicles hard. The model which its currently sells has been trashed by critics as a showy, expensive toy beyond the reach of the average customer. It has delivered 330 sportscars by mid-April this year.

Tesla is a fringe player in the global automotive business with its all-electric two-seat sporty roadster which sell for $109,000 apiece. The San Carlos, Caliornia-based company is currently developing a Model S, a sedan priced at $57,400. Tesla chief executive, Elon Musk said the tie-up with Daimler has more to do with industrial rather than financial reasons.

The two companies seem to have identified several areas of cooperation starting with Tesla's lithium-ion battery packs that will be integrated into the first 1,000 electric versions built by Daimler. The companies will collaborate more closely on the development of battery systems, individual drive systems and individual vehicle projects. Musk is also looking to use Daimler's engineering, production and supply chain expertise to catalyse development of the Model S sedan.