Daimler to Buy Stake in Electric-Vehicle Company Tesla

By CHRISTOPH RAUWALD and MARA LEMOS STEIN

Daimler AG said it will buy a 10% stake in Silicon Valley electric-vehicle start-up Tesla Motors Inc., boosting its presence in the field of alternative drive systems.
The investment will earn Daimler a seat on the board of the venture capital-backed U.S. company. The German auto maker would only say it's paying a sum in the double-digit millions of euros. Tesla's investors will likely welcome the deal with Daimler, which brings a needed endorsement from an established auto maker as well as a partner offering deep pockets, a path to market and technical expertise.
The company is a fringe player in the global automotive business, selling sporty, all-electric two-seat roadsters for $109,000 apiece. The San Carlos, Calif., company is developing a sedan, the Model S, slated for 2011 and priced at $57,400. Tesla Chief Executive Elon Musk said the tie-up with Daimler is mainly motivated by industrial reasons rather than financial.
The two companies are already cooperating to integrate Tesla's lithium-ion battery packs and charging electronics into the first 1,000 electric versions of Daimler's tiny Smart car. As part of the deal, Daimler and Tesla will collaborate more closely on the development of battery systems, electric-drive systems and individual vehicle projects. Mr. Musk is also hoping to make use of Daimler's engineering, production and supply chain expertise to speed development of the Model S sedan.
"Our strategic partnership is an important step to accelerate the commercialization of electric drives globally," Daimler's research and development chief, Thomas Weber, said at a press conference in Stuttgart.
The move is part of a wider effort by Daimler to foster lithium-ion technology. In March, the company founded Deutsche Accumotive GmbH, a joint venture with Evonik Industries AG, making it the first vehicle manufacturer that develops, produces and markets batteries for automotive applications.
Daimler plans to introduce its first battery-powered Mercedes-Benz car next year. By 2012, Daimler aims to have its own lithium-ion batteries in all of its battery-powered Smart and Mercedes-Benz vehicles.
Write to Christoph Rauwald at christoph.rauwald@dowjones.com and Mara Lemos Stein at mara.lemos-stein@dowjones.com