Daimler’s selling its equity in Tesla: A new deal for the EV industry?

by / Thursday, 23 October 2014 / Published in Smartgrid-CI Blog

Daimler is selling its stake just before the launch of the B-Class electric, and at a time when the U.S EV market is slowing down.

By PATRICK LEVY

Five years after investing in Tesla at a moment when the Californian company was going through difficult times, Daimler is selling off its equity. It is a good deal for the German giant that bought in 2009 3.9% of Tesla’s equity and is reselling it now for $780M. In the meantime time, Tesla’s value has jumped to more than $29B. There may be several explanations to Daimler’s decision. Originally, Daimler’s interest in Tesla was to learn about industrializing electric cars and with the launch of the B-Class that will take place in Europe on November 3rd, it seems that the Stuttgart headquartered giant has learned enough and may now have difficulty keeping a relationship with a company that is positioning itself more and more as a direct competitor. This is why this operation fuels rivalry speculation. The other explanation is that it seems the U.S and the European electric vehicle markets are taking two different paths. In the U.S.A the electric vehicle market seems to be slowing down and this trend may be a long term one because, according to some experts, there is a direct relationship between lower E.V sales and the cost of gasoline going down. In other words, in the U.S EV’s are becoming less competitive compared to conventional engine vehicles, and this could be a lasting trend. This is the reason why big players like Ford have significantly slashed the price of their electric vehicles.

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Tesla has reached phenomenal sales goals so far. Model S should pass the 50,000 unit sold mark this month since its introduction in June 2012. But the U.S remains by far Tesla’s main market. Tesla’s sales are much less significant in Europe and Asia that appear to be more competitive markets, that offer bigger potential for growth. In Europe in particular, EV sales have almost doubled this year. In Europe and Asia Tesla’s market share remains small either because its products were introduced recently or because competition is tougher with the presence of multiple local or global players. Interestingly enough, Tesla is doing very well in Switzerland and Norway; two countries with very high GDP per capita. Sounds familiar? As a matter of fact, in the U.S.A, Tesla is also doing particularly well in California which is one of the richest states in the country and one with the biggest number of wealthy people. California absorbs about 50% of Tesla’s U.S sales. One of Tesla’s next challenges will be to get into less wealthy markets where demand is driven by lower cost vehicles offering. In a sense, Tesla’s next challenge will be to deal with more mature and broader demand where customers’ motivation for purchasing an EV has more to do with economics than with saving the planet or using an EV as a status symbol. Succeeding in Europe and Asia will become critical for the Californian company.

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