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After an early bet on Tesla, Daimler cashes in

Tesla was an entirely different company five years ago. Back in the spring of 2009, when Tesla was in a more precarious position than it is today, German auto giant Daimler bought a 10 percent stake in Tesla, worth a reported $50 million at the time. The deal, which was accompanied by a battery supply partnership, was a crucial moment for the then-struggling and cash-strapped electric car startup.

Now a little over five years later, Daimler announced on Wednesday that is has sold off the remaining amount of its stake in Tesla for $780 million. That stake was actually down to 4 percent (from the original 10 percent), as Daimler had sold off almost half of its initial stake in Tesla to an investing arm of the government of Abu Dhabi a few months after it first bought it. That fifty million dollar investment valued Tesla at $550 million in 2009; today Tesla has a market cap of $29.3 billion.

The first production Roadster. Image courtesy of Gigaom.
The first production Roadster. Image courtesy of Gigaom.

Daimler’s divestment shines a spotlight on just how far Tesla has come in just a few years. In early 2009 Tesla was transitioning out of a difficult place. Elon Musk had just taken over as CEO, the company had recently done a round of layoffs, the overall macro economy had taken a hit months before, and Tesla had to delay the timeline of what would later be the Model S. It also had yet to secure funds to build the factory for the Model S.

It was at that moment that Daimler stepped in with its important investment just as Tesla was starting to stabilize itself and deliver more of its first cars, the Roadster, to its oh-so patiently waiting customers. Daimler’s agreement to buy battery packs from Tesla for its electric Smart cars, and later the Mercedes-Benz B-Class, was also an important vote of confidence early on in Tesla’s core technology.

The deal couldn’t have come at a better time. Just about a month after Tesla announced its deal with Daimler in 2009, the Department of Energy stepped in with its $465 million loan to help Tesla build its factory. That was another crucial step in Tesla’s lifetime.

The Tesla Roadster.
The Tesla Roadster.

Daimler said that even after this divestment, its technology partnership with Tesla is still ongoing, but who knows if there will be any more deals after the Mercedes-Benz B Class one. Tesla started delivering the electric drive for Daimler’s Mercedes-Benz B Class in the second quarter of this year.

Daimler’s move away from Tesla could be interpreted in a few ways. Tesla’s stock was sky high earlier this year and trading up over $290 per share a couple months ago. But in recent months the stock has dropped and is trading at $232.42 as of today. Perhaps Daimler’s financial team thinks the stock has reached its peak.

On the other hand, Tesla’s Model S car has emerged as more of a competitor with Daimler’s Mercedes brand, and Daimler has also long been interested in building its own battery business in Germany, which distances it from Tesla even more. Even back in 2011, Tesla noted in its S-1 that Daimler has “indicated its intent to produce all of its lithium-ion batteries by 2012 as part of a joint venture with Deutsche Accumotive GmbH & Co. KG. … If Daimler goes through with its production plans with Deutsche Accumotive GmbH & Co. KG, we are likely to lose this portion of our powertrain sales.”

At one point Daimler and Tesla were so close that Daimler actually had right of first refusal if Tesla had an acquisition offer. But it seems these days, Daimler wants to move on from the little startup it once helped lift up, but which is now still a small but growing rival in its own right.