Is Tesla really worth $550 million? Daimler apparently thinks so
by Sam Abuelsamid on May 20th 2009 at 10:11AM 
Elon Musk and Dr. Thomas Weber in the Tesla Roadster
During Tuesday's announcement that Daimler was buying a 10 percent stake in Tesla Motors, Mercedes-Benz R&D boss Dr. Thomas Weber would only say that the company paid in the "double digit millions" for its share. That implies somewhere between $10 and 99 million. TechCrunch's Mike Arrington specializes in digging up information on Silicon Valley startups and according to his sources, the actual amount that Daimler paid is $50 million for nine percent of Tesla. If they did pay that much, and based on Arrington's history, there is no guarantee that the figure is correct, that puts the value of Tesla Motors at about $550 million.
The benefits to Tesla are obvious: cash, a customer for some of its technology and access to engineering and supply resources. The question is, what does Daimler really get for its $50 million? While integrating battery packs and developing management systems is by no means trivial, Tesla is hardly the only source of that capability. Other integrators are already working with the new, larger format automotive lithium ion cells. Weber acknowledged that Tesla won't be its only partner on electric drive systems.
There are other possible explanations for Daimler's move. (Note: This rest of this is pure speculation on our part). One possibility we can see is that Daimler wanted to lock up Tesla's battery know-how for itself to prevent competitors such as BMW from tapping into it. BMW is playing catch-up in the EV space and went to AC Propulsion (from whom Tesla itself licensed some of its early technology) to build the MINI E. Another possibility is that Daimler is using the Tesla investment as a goodwill gesture. By keeping Tesla viable, Daimler could be seen by many EV fans as a savior of the electric car. For that kind of positive feeling, Daimler might consider $50 million a small price to pay. Only time will tell.
Gallery: Daimler Tesla press conference
[Source: TechCrunch]
Reader Comments (Page 1 of 2)
jharlan 10:19AM (5/20/2009)
Way to go Elon! Things are looking up! Bring on your other models.
Reply
John Haystack 10:33AM (5/20/2009)
Correction: $550m is wrong. That WOULD be the value of Tesla IF all Tesla received for the 10% equity stake was $50m in cash. But they didn't. They also received Daimler's engineering expertise. And for a company that has never actually built a body or chassis (they rely on Lotus), this expertise and access to suppliers and engineers and know-how has immense value. Tesla will not disclose how they valued this expertise, but suffice to say, the more accurate valuation of Tesla inferred from this deal is far higher than $550 million.
Reply
Teddy 10:35AM (5/20/2009)
A French analyst (moteurnature.com) said that Daimler bough a share of Tesla to have access to their software managing the batteries.
Reply
Matt 11:26AM (5/20/2009)
"BMW is playing catch-up in the EV space and went to AC Propulsion (from whom Tesla itself licensed some of its early technology) to build the MINI E."
How is the only major automotive company with an electric vehicle currently available defined as playing catch-up?
Reply
guyledouche 11:45AM (5/20/2009)
-What EV does BMW have that is available tot he public?
I am not aware of any such vehicle
Matt 11:51AM (5/20/2009)
The MINI-E. Learn to read. You can lease one right now if you meet the criteria.
PeterG 12:17PM (5/20/2009)
That isn't available any more than Hondas FCX Clarity H2 vehicle is available. It is a research program involving real world users.
You can't just get one either there is a limited number and BMW is choosing "customers" based on how they will best fit their research.
Not available to the public.
Matt 1:17PM (5/20/2009)
My original point was that BMW is not playing "catch-up". They are further ahead than any other major auto maker in offering an EV.
Chris M 5:21PM (5/20/2009)
BMW is further ahead than any other auto maker - except for Tesla Motors, Think, GM, and possibly even Chrysler, thanks to their ENVI/GEM division. Nissan, Mitsubishi, Ford and Toyota are nipping at their heels.
This investment by Daimler in the currently leading EV maker should help them leap ahead of the competition, at least for awhile.
The plug-in competition is turning into an exciting race.
Yanquetino 11:53AM (5/20/2009)
I would agree with Matt. It seems to me that Daimler is the one playing catch-up. And since BMW already secured the EV drivetrain components from AC Propulsion, the best Daimler could do was cut a deal with someone who licenses said technology second-hand.
Come to think of it, do you know for a fact that the technology Tesla has licensed from AC Propulsion is merely "early" or "some"? How much of the current Roadster drivetrain is in fact licensed from AC Propulsion? My guess is that it is much more than most people realize, but please prove my speculation wrong with an actual reference.
Reply
Doug 1:58PM (5/20/2009)
Currently, "Reductive Charging" is licensed from ACP. However, that has been designed out of their version 2 drivetrain which will be on the 2010MY Roadster, starting delivery in July.
Yanquetino 2:17PM (5/20/2009)
Reference?
Does that mean, come July, Tesla will no longer license any technology from AC Propulsion? It almost sounds like they have been reverse-engineering the licensed components to come up with their own imitations.
Doug 3:10PM (5/20/2009)
References?? I dunno... Noting particularly documented. Just conversations I've had with various people. Key to ACP's Reductive charging (Reductive is a trade name) is using the windings of the motor as an inductor. Part of the consequence of that is the motor has to be electrically isolated from the transaxel (as seen here: http://www.flickr.com/photos/26339101@N07/3482643402/in/set-72157617197534553/). But Tesla is going away from this, probably to save money on the licensing fees.
I had a chat with JB about the Model S and Roadster drivetrains at the Model S unveiling in LA back in March. You can download audio from that here: http://teslamotorsclub.com/audio/JB%20Straubel.mp3 (Please excuse that I'm a physics guy, not a journalist.) At about 2:12 we talk about the Roadster drivetrain "version 2", and JB mentions how they're changing the charging topology.
Anyhow, I don't know if that means Tesla will no longer license *any* tech from ACP. Just that, as I understand it, they will no longer be using their Reductive charging.
Chris M 5:39PM (5/20/2009)
"Reductive Charging" was developed by AC Propulsion as a rather clever way of using the components of the AC induction motor inverter to regulate charging and adjust the input voltage to the voltage required for charging. This enabled charging with a wide range of input voltages, and it greatly reduced the parts count and cost over using a separate charge controller.
Roy 11:59AM (5/26/2009)
If you do enough digging on Tesla's web site you will find that Tesla did a lot of improvements after adopting AC Propulsion's basic design. Tesla has patents on their own motor design and they scrapped AC Propulsion's controller as antiquated linear design in favor of a modern digital cpu design. Tesla did license AC Propulsion's concept of using the power transistors for both charging the battery and driving the motor (pretty obvious I think, but they do have a patent on it).
why not the LS2LS7? 11:57AM (5/20/2009)
Tesla has no significant battery know-how. Their pack costs more, weights more and is larger than anyone else's packs.
They seem to have a decent motor controller though, my understanding is they abandoned the one designed by AC propulsion, and now designed their own, although still using the AC propulsion patents and technology.
Reply
PeterG 12:18PM (5/20/2009)
Teslas pack is likely cheaper than others as they used the cheap off the shelf commodity lithiums. Packs with more esoteric Chemistry and more patents wrapping them (A123, nanosafe etc,,) are going to be more expensive. Also the base cells in A123s have poor power to weight density so an A123 pack would be heavier as well.
But cheap is likely the only thing Tesla has going for it's pack. I am not fond of the fragility of common laptop cells.
jake 2:41PM (5/20/2009)
It's all relative. You have to compare capacity to weight and I'm sure even with the extra cooling it has more energy density.
For example, an a123 cell in a larger 26650 form factor with 3.3V 2300mah weighs 70grams.
A typical laptop cell in the smaller 18650 form factor with 3.7V 2400mah weighs 50grams.
Doing the calculation for the laptop cell alone, you get 178Wh/kg.
Doing the calculation for the 53kWh usable energy in Tesla's 450kg pack, you get 118Wh/kg for their pack.
Doing the calculation for the a123 cell alone, you get 108Wh/kg. The a123 cell is losing already without including an enclosure and necessary wiring for the cells.
Obviously Tesla's pack is more energy dense gravimetrically. And it appears it is more energy dense volumetrically too. With laptop cells being the most common and with the most suppliers, the probability of getting a lower price is much higher. So there are obvious benefits to Tesla's approach. The obvious negative is the lower life cycle of laptop cells, so Tesla has to waste more energy keeping the cells at optimal temperature at all times (apparently the system runs even with the car off, which wastes a decent amount of energy) to extend long term life.
why not the LS2LS7? 4:21PM (5/20/2009)
No, Tesla's pack is not cheap. Larger cells are cheaper, but Tesla doesn't use these as they don't have a supply. They use more, smaller cells. Smaller cells means more cell casings, more costs.
I don't know where you get your patent thing, we're talking about cell size, not chemistry here. A cell doesn't become patented just because you make it larger.
In short, other companies purchase enough cells they can get exactly what they want. This reduces costs on cells, it reduces costs on packaging.
Open up any music player you get a chance to open. Do you ever see two cells in there? No. If a larger cell exists, they use the larger cell, because it's cheaper than two smaller ones. This is why Tesla's pack is not as cost effective as other companies' packs. Tesla will switch to larger cells as soon as they can manage to engineer it and get a supply.
Chris M 5:59PM (5/20/2009)
At 53 Kwh capacity, the Tesla battery pack currently holds significantly more energy than any other automotive battery packs, so you'd expect it to weigh more and cost more and be larger. Funny thing is, it weighs less than the NiMH battery once used in the EV1, and is about half the cost of the 35 Kwh Altairnano battery.
Fact is, as Jake pointed out, the energy density (by weight and by volume) of the Tesla pack is currently better than any of the competition. The cost per Kwh stored is less than the competition as well. Admittedly, there is plenty of room for improvement in both energy density and cost, and plenty of competitors trying to do that.