Mercedes Is Saying Goodbye To Tesla

Mercedes has been using batteries, motors, and inverters supplied by Tesla for its B-Class Electric model, but now Mercedes is saying goodbye to Tesla for good. Going forward, it will use its own motors and inverters in the B-Class Electric and look to other companies for the batteries. According to Germany’s highly regarded Auto Motor und Sport (AMUS), Mercedes says the updated B-Class Electric will have more than 300 miles of range, which is a big step up from its present range of 100 miles using Tesla components.

Mercedes B Class Electric

The AMUS report does not make it clear if that range is based on the European testing standard or the US protocol. If predicated on the European testing procedure, range in the US would work out to more like 200 miles, but that is still equal to the upcoming Tesla Model 3, which is due in showrooms in 2017. If it is based on the US protocol, that is more than the best Tesla has to offer.

The current B-Class Electric lists for $42,375, which is about $8,000 more than the Tesla Model 3. But many industry analysts doubt whether the Tesla will really be able to sell the Model 3 for only $35,000. Many expect the car, with popular options, will retail for between $40,000 and $50,000. Of course, what a next-gen B-Class Electric sells for is even more up in the air.

Mercedes already has 3 other plug-in cars in the showroom — the S 550e, C 350e and the GLE 550e — and says it plans on having 10 plug-in models on the road by 2017. All of the batteries for the current plug-in hybrid models are sourced from Panasonic. Whether Panasonic will supply all of Mercedes’ needs going forward, including the B-Class Electric, is unknown.

It is interesting to note that Panasonic is Tesla’s major partner in the Gigafactory being built in Nevada. But it apparently is still willing to chart its own course independent of Tesla when it comes to supplying other car companies.

The contract with Mercedes accounts for about 11% of Tesla’s accounts receivable, according to a writer at Seeking Alpha. The company’s latest 10-K filing with the SEC says:

Powertrain component and related sales for the periods presented were related to powertrain component sales to Daimler under the Mercedes-Benz B-Class Electric Drive program which commenced in April 2014 and to Toyota under the RAV4 EV program. Powertrain component and related sales for the years ended December 31, 2014, 2013 and 2012 were $113.3 million, $45.1 million and $31.4 million. During the third quarter of 2014, we completed the RAV4 EV program.

No matter what you may think of Tesla’s financial future, losing a significant amount of income and gaining a competitor that equals or exceeds the best it has to offer in terms of range cannot be cause for jubilation at company headquarters.

[Editor’s Note: Given that even Tesla Gigafactory battery production is not expected to meet demand for Tesla’s Model S, Model X, Model 3, Powerwall, and Powerpack, possibilities for the change from Mercedes could be Tesla’s unwillingness to extend the contract–as seemed to be the case with Toyota–or proactive caution from Mercedes to ensure adequate supply. It’s also unclear when a next-gen B-Class Electric is supposed to be on the market, but it seems that it would be at least a couple years out. –Zachary Shahan]

Steve Hanley

Closely following the transition from internal combustion to electricity. Whether it's cars, trucks, ships, or airplanes, sustainability is the key. Please follow me on Google + and Twitter.