Trying to find the upside to Tesla-Daimler deal
Elon Musk and Dr. Thomas Weber with the Tesla Roadster and the smart ed
Not everyone think the big Daimler-Tesla deal announced last week is a win-win. In fact, Jay Yarow over at Business Insider is trying to figure our how either side benefits from Daimler's estimated $50+ million investment in Tesla. Yarow's basic argument is that Tesla didn't get enough to save itself and Daimler "picked up a company that has got one product with weak sales and is about to be saddled with enormous debt." Yarow also thinks that demand for Tesla's cars isn't exactly staggering, and it won't get better because there will be a lot more competition in the all-EV market, a market that Tesla currently dominates by default, in a few years.
Based on the excitement this deal generated, though, it's clear that Daimler got something for its money. Association with one of the leaders in the electric car field is an obvious plus, and there's got to be technology involved in the deal that Daimler wants. Yarow does admit that he's not seeing the whole picture, writing, "We must be missing something, though, because in this market, car companies don't let $50 million walk out the door for no good reason."
Gallery: Daimler Tesla press conference
[Source: Business Insider]
Reader Comments (Page 1 of 1)
~D. 11:34AM (5/24/2009)
dominates by default?! WTF?!
"uh yea, they BUILD stuff and people BUY it, but I would hardly call that sales. That's just the exchange of money for goods and services."
clown.
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downtoearth 11:38AM (5/24/2009)
WOW, what a politically correct picture!
"Elon Musk and Dr. Thomas Weber with the Tesla Roadster and the smart ed". Makes you think Mercedes is mostly producing small turdlet cars with electric propulsion, trying to save Mummy Earth.
Why oh why didn't they take a photo of "Elon Musk and Dr. Thomas Weber with the Tesla Roadster and the 10mpg 5000lbs Mercedes ML 63 AMG"?
There wouldn't even be a justification for the ML 63 AMG. I mean, with its 56inch rims it's useless off road and makes no sense as a workhorse pickup. Cause it's not a pickup. It was only made to cater mankind vanity. And yet, when striking the deal, the Daimler PR department comes up with an all electric Smart which hasn't arrived yet.
ML 63 AMG doing 10 mpg:
http://www.edmunds.com/insideline/do/Drives/Followup/articleId=118931
ML 63 AMG geting 12 mpg EPA combined:
http://www.fueleconomy.gov/feg/compx2008f.jsp?year=2009&make=Mercedes-Benz&model=ML63%20AMG&hiddenField=Findacar
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win39 1:51PM (5/24/2009)
Who knows what is in the deal? Business publications do not really understand business. For decades they predicted the demise of Apple Computer and currently just follow web rumors on the Mac sites for their next day pronouncements. They were completely in the dark on the Daimler-Chrysler merger and were shocked when Daimler ended up owning Chrysler. They went from explaining the merger by how attractive the profitable Chrysler was to explaining that Daimler dumped it because it was unprofitable. I don't think they can read a profit and loss statement. I don't think anyone really understands what really happened with the Daimler/Chrysler deal. Yarow's puzzlement may be the first honest expression from a business publication.
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Nick P. 1:59PM (5/24/2009)
The "Business Insider" article is a good example of Jeremy Clarkson-type dishonesty. They don't like Tesla, don't like electric cars and try to make Daimler and Tesla look like idiots. Look at the Elon Musk picture they choose: he's scratching his head like he's clueless. Not fair.
They can hate Musk, Fisker or even Lutz all they want; mass production electric cars will happen, one way or the other.
- Nick -
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roz 2:55PM (5/24/2009)
just to take a stab at it:
Daimler gets:
a stake in the most innovative car company on the planet
access to ev and power controller know-how
needed tech for its smart cars
tesla gets:
cash
more credibility = better access to additional capital
a customer, smart ed, means more cash-flow
engineering expertise, Daimler has made a few sedans
a potential long-term exit for investors, an IPO is preferred but always nice to have a backstop
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Scarhawk 4:19PM (5/26/2009)
What Daimler really gets here is access to a car-sized battery pack design that actually works, and won't explode and kill people if it gets damaged in a wreck. That's the hard part of designing an electric car, if you read Tesla's design blogs. There's a lot of electro-mechanical knowledge in the transmission etc., but Daimler presumably already knows a lot about mechanical design. It's the electrical energy storage subsystem that car makers know almost nothing about - they've been sticking a $30 lead-acid brick under the hood for decades and know nothing about batteries. The expertise required to ship that big a battery safely is not something any car maker has today.
Daimler will design Tesla's battery pack into electric Mercedes cars. Tesla will eventually get more revenue from selling battery packs to other car makers than they do from selling their own cars. They may even spin out the battery pack unit into a separate company eventually.
Doug 4:45PM (5/24/2009)
Jay Yarrow has been pretty snarky about Tesla for a while now. Posting meaningless "articles" such as a comparison with Twitter:
http://www.businessinsider.com/tesla-now-worth-less-than-twitter-2009-5
What's the point?
Certainly, there is some technology involved in the deal.
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mister nomer 5:00PM (5/24/2009)
What I think BusinessInsider overlooked is that Daimler also gets the only EV brand with actual name recognition and all the good PR that comes from that. Think of all the articles written about the Prius and all the free publicity that Toyota gets from that, both for the Prius and for its overall image.
Daimler already has an army of PR folks (with expense accounts) and a set of promotional arrangements with various media companies. Now they can use those assets to go out and sell the idea that Daimler is a serious green company like Toyota by virtue of their stake in Tesla. Plus, when Chris Paine's 'Revenge of the Electric Car' comes out, I'm sure that movie will give a glowing review to Tesla (and now to Daimler too).
That's all worth something. How much?
Well, think for a moment how much money you'd have to spend to build that sort of image in the public consciousness. A half-minute of advertising during the last Super Bowl cost $3 million.
With that in mind, $50 million for green car PR that lasts and lasts sounds like a good deal to me. Throw in the chance to see exactly how big of a lead the market leader has on you and the chance to eliminate that advantage (if any) through technology sharing, and it's practically a steal.
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Roy 5:15PM (5/24/2009)
Just to expand on roz's list a little:
Tesla has the highest power to weight electric motor in the world and patents to protect it. Daimler will undoubtedly get manufacturing rights to their design.
Mercedes-Benz announced about a year ago that they would stop producing gas or diesel powered cars by 2015, and now must fast-track conversion to electric to meet their goal. Tesla's battery pack is already crash certified and legal to ship on airplanes (no small deal). Even though Daimler will be using their Evonix batteries in future models, initial production will use Tesla's.
Evonix batteries are Lithium Manganese Polymer similar to batteries used in Tata's Indica EV, GM's Volt, and Hyundai's new hybrids. It would be in Tesla's best interest to use this superior design in future models when Evonix gets into full production.
I definitely see win-win in this deal.
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BlackbirdHighway 9:48AM (5/25/2009)
Google "electric car"
After the sponsored links you get a news article about Tesla and a link to the Tesla Motors website. Just as Frigidaire mean refrigerator and Kleenex means facile tissue, Tesla is becoming the name brand that is synonymous with electric cars.
Mercedes has long been the brand name of luxury autos.
It's difficult to understand how anyone can question this deal unless they have an ulterior motive.
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Snoopy 2:15PM (5/25/2009)
I couldn't find anything Tesla related until the second page.
Sometimes Google results are considerably different by location. I got a lot of Volt and Zenn stuff, and some videos.
Bill Max 10:13AM (5/25/2009)
Seems like some companies never learn from their mistakes. But they still fresh out of Chrysler loss, so 10% stake is not too much to loose. They survived even dumber plans.
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tankd0g 10:38AM (5/25/2009)
Mercedes just paid for the badge, Tesla's own products are still dead in the water. Look for the Tesla-Mercedes branded A-Class EV in the same vain as the McLaren-Mercedes SLR. This is what Dailmer does.
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Tim 1:24PM (5/25/2009)
Upside?
Greenwash!
(Tesla uses 6,831 little laptop batteries in their half ton pack, so it's NOT their technology when compared to the new, more advanced prismatic automotive packs.)
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Chris M 5:14PM (5/26/2009)
Tesla used those little cells because they had the highest energy density and the lowest cost per Kwh of any battery available back when they started Roadster development. However, they don't make those little cells, and would have no trouble switching to other battery sizes and types if an improved battery with even higher energy density or lower cost comes along.
Scarhawk 4:39PM (5/26/2009)
Tesla did the best they could with the cells available at the time they began their design. Now that they've proven the viability of the electric car market, cell manufacturers (both established players and startups) are responding with more car-appropriate designs. It's no shame on Tesla if they switch from the current design to a better one in the future, any more than if Dell switches from last year's CPU to this year's in their computers. The question is whether anyone can design a better battery *pack* than Tesla has done. Tesla can buy cells from anyone and redesign the pack accordingly.
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