Daimler, the German auto maker known for its ownership of Mercedes-Benz, has acquired a nearly 10 percent stake in Tesla Motors, the anointed electric car company to watch. And the deal — worth an unspecified tens of millions of dollars — couldn’t come at a better time, with the latter running on less capital than it would like as it develops its hyped Model S sedan.
Tesla’s financial woes are well documented. Late last year, the company was reportedly out of cash before pulling down $40 million of what it hoped would be a $100 million round of capital. It wasn’t able to bring any new investors into the fold, either, leaving it to depend on federal loans that have stalled pending approval. The closer partnership with Daimler should help grease the wheels and soothe some nerves. That being said, Tesla’s chief executive Elon Musk has been emphatic that the company was not in dire need of outside funds, adding that it could have gotten more from a private investor if it had waited a little longer.
Perhaps more important than the financial support, the deal will give Tesla access to Daimler’s commercial-scale production line technology, something the company has been sorely lacking as it strives to develop a car with mass, middle-class appeal. The Model S, slated to come to market in 2011, is the closest it has come to this ideal at $57,400. While that seems affordable compared to its $109,000 roadster, it’s still pretty steep for most American families. More capital and technology development will be needed to bring that price down.
Before now, Daimler and Tesla’s partnership had centered on batteries. At the start of the year, the German company contracted Tesla to provide 1,000 lithium-ion battery packs and chargers for its own Smart electric vehicle model over the next two years. Its new stake will not only give it access to more batteries but allow it to be more closely involved in the battery development process. So far, the deal appears to be a win on both sides.