Mercedes Puts Tesla Technology Beneath Hood to Chase BMW

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Mercedes Benz B Class
A Mercedes-Benz B-Class electric automobile, produced by Daimler. During the test drive, the white B-Class blended in among other compacts on the island’s windy asphalt roads in Mallorca. Source: Daimler AG via Bloomberg

Mercedes-Benz’s first mainstream electric car has Tesla technology under the hood, though it’s not flaunting it.

Unlike Bayerische Motoren Werke AG, which wrapped its competing emission-free model in futuristic carbon fiber, Daimler AG’s Mercedes unit put an electric motor and battery inside its existing van-like B-Class hatchback. The only clues that it’s electric are a couple of small decals and the blue trim on the mirrors and front grille.

Teaming up with Tesla Motors Inc. is supposed to help Mercedes transfer some of the hipster aura of the electric-vehicle pioneer to the B-Class while avoiding the pitfalls of spending billions on a technology few may want to buy. Whether it will resonate with the consumers who do want to be part of the automotive avant-garde is another question.

“The B-Class electric is a low-cost and low-risk solution for Daimler,” said Stefan Bratzel, director of the Center of Automotive Management at the University of Applied Sciences in Bergisch Gladbach, Germany.

Because the electric B-Class shares an assembly line with the gasoline and diesel versions, Mercedes doesn’t need to sell a fixed amount of vehicles to cover its costs, Bratzel said.

“You can reasonably say that nobody today is making a battery-powered vehicle that’s economically viable in its own right,” Daimler Chief Executive Officer Dieter Zetsche said at an Oct. 27 event on the Spanish island of Mallorca to present the electric B-Class to journalists. “Manufacturers will not see a return within a reasonable time on the billions they’re investing now.”

Less Effort

Despite the purpose-built design of BMW’s i3, its range, performance and interior space are very similar to those of the B-Class, Zetsche said. “But our effort was dramatically smaller.”

BMW counters that creating a new electric car has advantages over re-fitting existing models.

“Weight, driveability and range are in ideal proportions,” said Mathias Schmidt, a spokesman for the Munich-based company.

Consumers will get to decide when the emission-free B-Class reaches showrooms in Germany on Nov. 29. It comes with a range of about 200 kilometers, or 124 miles, at prices similar to the i3, Zetsche said. The BMW car costs about 35,000 euros ($43,766) in Germany and $41,350 in the U.S, where a version of the electric B-Class has been available in selected states since mid-July. A broader rollout is set for next year.

Windy Roads

During the test drive, the white B-Class blended in among other compacts on the island’s windy asphalt roads.

Though the car weighs about 200 kilograms (440 pounds) more than the conventional gasoline and diesel B-Class because of the big battery pack, it accelerated swiftly, thanks to the instant power of the electric motor. It was almost silent, except for an artificial sound Mercedes added to warn pedestrians at speeds up to 30 kilometers (19 miles) per hour. The center display continuously updated the car’s current range, charging level and energy flow.

The battery and motor come from Palo Alto, California-based Tesla, led by billionaire Elon Musk. Though Daimler loosened the relationship last month, selling its 4 percent stake for about $780 million, it says it will keep the startup as a supplier.

“Tesla’s electric drivetrain fits well to the B-Class,” said Daniel Schwarz, a Frankfurt-based analyst with Commerzbank. “It offers a good range and didn’t cause much hassle for Daimler to adapt.”

For Stuttgart-based Daimler, this is the third battery-powered model after the e-Smart city car and an electric version of the Mercedes SLS supercar that’s now out of production. It has the best chance of winning buyers.

Potential Customers

“The B-Class addresses a much larger number of potential customers” than either of Mercedes’s previous electric models, said Hans-Peter Wodniok, a Kronberg, Germany-based analyst with Fairesearch GmbH. “The current attempts by Daimler and BMW are far more promising than Renault’s Twizy or the Smart,” which seat only two people. “The B-Class or i3 are serious vehicles that also look like cars.”

How much of a market either will be able to exploit remains to be seen. Demand for electric vehicles has been developing slower than expected as high vehicle prices and fears of being stranded along the roadside by a dead battery left buyers hesitating. Renault SA Chief Executive Officer Carlos Ghosn, also head of alliance partner Nissan Motor Co. and an adamant proponent of electric vehicles, last year postponed a goal to sell a combined 1.5 million electric cars by 2016.

Global electric-vehicle production will more than quadruple to 1.02 million in 2020, according to an estimate by IHS Automotive. This would still give the models just 1 percent of the market, compared to the 0.3 percent share predicted for this year.

Showy BMW

Still, BMW’s riskier strategy might eventually pay off. The world’s biggest luxury-car maker’s i3 will probably outsell the electric B-Class two to one in 2020, according to IHS estimates. And that’s only counting pure battery-powered vehicles. Orders with an on-board gasoline-powered generator to extend the range will propel i3 sales to 32,400 compared with 6,400 B-Classes, according to IHS.

That may be because people who buy electric vehicles actually want other drivers to notice how environmentally conscious they are, said Anjan Hemanth Kumar, a Bangalore-based analyst for Frost & Sullivan Inc.

“For the identity of the customer, it’s very important to have a proper electric vehicle with a unique identity so they can differentiate themselves,” Kumar said. “You want to show off, just as a Ferrari driver wants to show off.”

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