Tesla Motors Is Stayin’ Alive

Tesla Motors’ successes and struggles have been well documented. This morning, it added to the "success" column when it jointly announced that Daimler will be taking a 10 percent stake in the electric carmaker and that Tesla will effectively become the German giant’s go-to battery and electric powertrain developer.

Daimler said that its stake will be in the “double-digit" ten millions. Tesla CEO Elon Musk, on hand for the press conference in Stuttgart and ever the evangelical spinmeister, insisted that “Tesla does not need capital immediately” and could have received a “higher share price from a pure financial investor.” In exchange for its money and commitment, Daimler gets a seat on the Tesla board and will send a representative to Tesla to oversee the new “strategic partnership.”

This is actually a pretty straightforward deal. Tesla needs cash and is wisely leveraging its one major technological advantage—its allegedly profitable battery and powertrain business. Tesla and Daimler have already sampled each other’s moves through an agreement for Tesla to provide batteries for Daimler’s test fleet of Smart EVs. It seems that Daimler enjoyed the dance. As a plus, Tesla will gain access to Daimler's battery-cell provider, which should enable the Silicon Valley startup to improve its battery-management protocols.

Tesla now continues its increasingly aggressive campaign to prove viability. Daimler’s stake is clear proof that Tesla is no flash in the pan, and the unveiling of the Model S electric sedan in March revived belief that the company can create EV designs that are viscerally exciting. The Department of Energy now ought to be able to greenlight a $450 million loan that Tesla will need, urgently, to get the Model S to market. It remains to be seen how much the Model S, as it shifts from prototype to construction, will start to resemble a Mercedes. It also remains to be seen how exclusive the new relationship is. If Tesla can do EV powertrains for Daimler, it can presumably do them for anyone else who wants to get into the game. But Daimler is now first in line.

UPDATE: Jalopnik's Ray Wert thinks Daimler may want to at some point gather Tesla into its broad Teutonic bossom. Quite possibly. Some informal conversations I've had with auto journalists have made me think that Tesla may never be able to independently realize its vision of three different EVs: a roadster, a luxury sedan, and a family-oriented crossover. Its future may be as a powertrain supplier. Which doesn't mean that it's game over for Elon Musk's ambitions. In the early 20th century, Alfred Sloan ran a ball-bearing company that merged with what would become General Motors. Sloan eventually became the most successful executive in the history of the U.S. auto business.