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Daimler looks beyond Tesla with BYD electric-car partnership

Until Toyota stepped in last week, Daimler was the only major auto manufacturer to take a stake in electric-car startup Tesla Motors — a company that has now become synonymous with next-generation transportation. Now Daimler wants to work the same magic with BYD, the Chinese battery and electric vehicle maker.

Daimler announced today that it is partnering with BYD to build a new brand of electric cars via a joint venture called Shenzhen BYD Daimler New Technology. Together, they have invested $88 million into the development of the product, which will be targeted at Chinese consumers.

The deal sounds extremely similar to the partnership announced by Tesla and Toyota last week. Even though the most recent version of Tesla’s S-1 filing reveals that no official agreement has been made between the two companies, both of their CEOs aired plans to build a car in tandem, with Tesla providing the unique powertrain system and Toyota supplying everything else. Seemingly following in their footsteps, Daimler says it will be building cars around BYD’s powertrains and batteries.

While Tesla has a proposed all-electric Model S sedan in the works, BYD already has an all-electric car of its own, the e6, which has found its way into Chinese government fleets so far. The big difference: the e6 is already out and ready to launch on the consumer market this year, while the Model S is slated to launch in 2012.

For this reason, it seems like BYD might be a more stable partner for Daimler. Not only does BYD have a thriving battery business, it also has the blessing of American mogul Warren Buffett, who bought a $230 million stake in the company. A shrewd investor, he rarely chooses wrong.

In addition to its technology, BYD also brings manpower to the table. The company already boasts 3,000 engineers and has the capacity to hire 10,000 more. It also has a low-cost manufacturing infrastructure in place, which the joint venture will be able to take advantage of. Tesla says it will also be able to staff its recently purchased NUMMI automotive plant with 10,000 workers prepared to churn out Tesla-Toyota vehicles, but the ramp up will be slow, if it happens at all.

The Daimler-BYD joint venture also has government subsidies to look forward to in China. Already, the government has expressed support for the development of greener vehicles, and incentives for consumers are believed to be on the way.

The two companies have yet to announce a timeline for their new brand of cars. Tesla says that its potential vehicle developed with Toyota would probably come out in four to five years. As an investor in the company, Daimler obviously has an interest in this coming to fruition. In the meantime though, it looks like its hedging its bets with a BYD alliance likely to yield more results sooner.

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