Daimler Sells Tesla Stake as Luxury Competition Emerges

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Daimler AG sold its stake in Tesla Motors Inc. as the maker of the battery-powered Model S sedan evolves from a startup into a competitor for the German automaker’s Mercedes-Benz luxury cars.

Daimler owned 3.9 percent of Palo Alto, California-based Tesla, according to data compiled by Bloomberg. The share sale generated about $780 million in cash for the Stuttgart-based automaker, which will add to earnings before interest and taxes by a similar amount, the company said in a statement yesterday.

The five-year partnership yielded the technology that powers the Mercedes B-Class, the company’s first foray into mass-market electric cars. Yet even as the Daimler model went on sale in the U.S. this year, Tesla’s Model S was showing it can compete with Mercedes’s top-of-the-line S-Class, said Arndt Ellinghorst, a London-based analyst with ISI Group.

“Tesla has emerged as a serious competitor with the Model S outselling the old S-Class in the U.S. last year,” Ellinghorst wrote in a note to investors today. “The ties between the two companies have loosened over time. From Tesla’s perspective, it may be more interesting to work with BMW going forward.”

The lightweight carbon-fiber auto-body technology that Bayerische Motoren Werke AG has put into its own i8 and i3 electric vehicles may make it an attractive partner for Tesla, Ellinghorst wrote.

Collaboration Condition

Ownership isn’t a necessary condition for collaboration now that Chief Executive Officer Elon Musk, Tesla’s co-founder, has made his company’s technology public for any manufacturer to use, Richard Hilgert, an analyst with Morningstar Inc., said yesterday in a telephone interview.

Musk pledged in June to make Tesla’s inventions in electric cars and batteries free for anyone to use “in good faith,” a move that showed he was positioning the company for a more open relationship with the global auto industry than the projects it’s had with investors Daimler and Toyota Motor Corp.

“There’s not much to gain from being a shareholder,” said Daniel Schwarz, a Frankfurt-based analyst at Commerzbank AG. “It’s unclear if Tesla will remain a long-term supplier for Mercedes,” Schwarz said, as Daimler shifts more toward plug-in hybrids instead of Tesla’s all-electric drivetrain.

Daimler will keep on cooperating with Tesla just as it does with other suppliers in which it doesn’t hold a stake, Hendrik Sackmann, a spokesman, said today. Work on Mercedes electric-drive cars has been completed, and the company will continue buying powertrain components from Tesla.

“Our partnership with Tesla is very successful and will be continued,” Daimler CEO Dieter Zetsche said in yesterday’s statement.

Critical Time

When Daimler bought into Tesla in 2009, it was able to get a 9 percent stake for $50 million. Its investment and that of Toyota came at a critical time for then-private Tesla, giving the upstart needed capital and revenue after a cash crisis. Those relationships have since evolved.

While Toyota still owns a 2.4 percent stake, it’s no longer buying components from Tesla and is instead embracing fuel cells, a technology that Musk ridicules. The ties began to unravel as sales of the co-developed RAV4 electric vehicle have wound down. Tesla agreed with Toyota to “put things on hold and circle back maybe in a year or two,” Musk said June 3 at Tesla’s annual shareholder meeting.

Daimler said it intends to use the proceeds from the stake sale to strengthen its automotive lineup. The manufacturer, also the world’s biggest truckmaker, has said it will introduce a dozen new Mercedes cars by the end of the decade. Also in the works to meet more stringent emission regulations are 10 additional plug-in hybrid models by 2017.

Tesla Know-How

“Daimler used Tesla’s know-how to bring the B-Class electric car into series production,” said Hans-Peter Wodniok, a Kronberg, Germany-based analyst at Fairesearch GmbH. “Maybe they think they now know enough of the business.”

Already on sale in the U.S., the B-Class electric-drive compact car will be available in Europe next month.

Tesla fell 0.5 percent to $234.20 at 10:58 a.m. New York time and had gained 56 percent this year through yesterday’s close. Daimler rose 0.2 percent to 59.47 euros at 1:05 p.m. Frankfurt. The stock has returned a loss of 2.3 percent including reinvested dividends this year, compared to a 6.7 percent decline in Germany’s DAX Index.

The company reports third-quarter figures tomorrow and said on Oct. 14 that cash flows from industrial operations surged about 80 percent in the period, boosted by higher earnings on record deliveries of Mercedes-Benz cars.