Is Daimler Buy-in a Death Knell or Salvation for Tesla?

Is Daimler Buy-in a Death Knell or Salvation for Tesla?
by Christine Lepisto, Berlin on 05.20.09

Solid Buys Sexy
Yesterday, Daimler AG acquired about ten percent of Tesla Motors, Inc. The purchase had been in the works for 18 months, and follows the establishment of a Daimler-Tesla partnership for cooperating on battery technology. Further acquisition is not being ruled out.

German engineering meets American pioneering spirit. "Solid Buys Sexy," the German newspaper Die Zeit headlined the news. But is this a match made in heaven, or the beginning of a slow death for independent e-car startups?

Does Tesla Need a Partner to Survive?
Certainly Tesla counts among the pathfinders venturing into unexplored territory to return with visions of a better future, a vision of affordable electric cars that excite buyers. But the economic crash hit Tesla too, threatening layoffs and delays and stalling plans for a Tesla Model S Factory in San Jose. The infusion of financial strength, and distribution know-how, might be a necessary step to the success of electric cars in the still fossil-fuel dominated market.

Are Batteries Powering the Buy?
The driving force behind the acquisition may be Daimler's interest in pushing battery technology from Li-Tec, being developed through Deutsche Accumotive GmbH, Daimler's joint venture with Evonik. Daimler claims Deutsche Accumotive is "the first vehicle manufacturer worldwide that develops, produces and markets batteries for automotive applications."

Will the Real Battery Expert Please Stand Up
Showing that the dance is on, Elon Musk claims to be "battery agnostic" but open to the Li-Tec cells. According to Musk, Tesla is looking to leverage "Daimler’s engineering, production and supply chain expertise." After all, it is Tesla that is supposed to be bringing expertise in batteries and electric drives to Daimler, who turned to Tesla in order to speed up introducing an electric version of the Smart forTwo.

Nevertheless, Musk admits: "Daimler is also on the leading edge in the field of sustainable mobility. Among others the lithium-ion pouch-cell battery developed by Daimler and especially designed for automotive applications is of interest to us."

Tesla Proceeds with Plans
For Tesla's part, spokesperson Rachel Konrad told egmCarTech that Tesla intends to proceed with plans to build the model S in California, using the $350 million DoE loan and down payments on over 1000 Tesla model S electric cars reserved so far, and to proceed with plans to open Tesla showrooms around the globe. But the financial markets are already touting the advantages Tesla will have relying on a network of Daimler outlets for sales and support.

So is Daimler looking to hand pick the best of Tesla's ideas and technologies and then beat Tesla at their own game? Or will Teslas sell like hotcakes through Daimler's worldwide distribution network, luring customers with the promise of excellent service nearby, and establishing Tesla as a powerful brand? Time will tell.