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Mercedes-Benz wants Tesla collaboration increased to topple BMW

The 2014 B-Class Electric Drive Mercedes Benz is

The 2014 B-Class Electric Drive Mercedes Benz is presented at the New York International Auto Show. (March 27, 2013) Credit: AP

Daimler AG plans to look at additional cooperation projects with Tesla Motors Inc. as the maker of Mercedes-Benz luxury cars targets Bayerische Motoren Werke AG’s sales lead.

Daimler, which will use a Tesla drivetrain in an all- electric version of the Mercedes B-Class compact, owns a 4.3 percent stake in the Palo Alto, Calif.-based manufacturer and plans to keep the holding to maintain ties.

“We should look at more cooperation so we like the stake,” Chief Financial Officer Bodo Uebber said today at a press conference in New York. Uebber is in New York meeting with shareholders to give them an update on the Stuttgart, Germany- based company’s plans to grow revenue and profit margins in the coming years.

Daimler Chief Executive Officer Dieter Zetsche has vowed to surpass BMW in sales by the end of the decade after Mercedes dropped to third behind Volkswagen AG’s Audi in 2011.

Underpinning that goal are plans to develop 13 all-new models in the next eight years, including the GLA compact sport-utility vehicle due in showrooms in early 2014.

BMW is looking to keep ahead of the competition by rolling out new models like the i3 electric city car and the i8 plug-in hybrid sports car in the coming months.

Tesla is an important piece of Daimler’s technology strategy as the German automaker looks at more applications for electric-powered cars, Uebber said. The company currently sells an electric version of the Smart city car and has rolled out a battery-powered version of the SLS gull-wing supercar.

‘Good Fit’

“Mercedes, with respect to the electric car, it’s a very niche operation for them,” Alan Baum, an auto analyst at Baum & Associates in West Bloomfield, Mich., said by telephone. “The product Tesla provides actually fits rather well with them, and the relationship between the companies has been a good fit.”

Daimler has bought battery packs and electric motors from Tesla for its Smart EV minicar and is readying an electric Mercedes-Benz B-Class hatchback using Tesla technology.

Harald Kroeger, Daimler’s vice president of electrics, electronics and e-Drive, is a member of Tesla’s board.

Tesla’s Model S sedan, priced from about $70,000 to more than $100,000, is the top-selling vehicle this year in eight of the 25 wealthiest U.S. ZIP codes, according to, citing analysis of new-car registration data from R.L. Polk & Co. All eight communities are in California, Edmunds, a Santa Monica, Calif.-based automotive data company, said Oct. 31 in a statement.

Margin Target

In addition to boosting sales, Daimler plans to cut 2 billion euros ($2.7 billion) in costs through 2014 to rival BMW in profitability. Mercedes has a long-standing target of generating operating profit equivalent to at least 10 percent of sales. The goal, which was originally targeted for 2010, was indefinitely postponed last year.

“We can once again close the gap with our competition on sales and margins,” Uebber said. “There is more and more confidence in our long-term strategy” and results in 2014 and 2015 can be “even better.”

Mercedes posted an operating profit margin of 7.3 percent for the third quarter, up from 6.4 percent in the second quarter. BMW, which reports third-quarter earnings Nov. 5, reported a profit margin of 9.6 percent from automotive business in the quarter ended June 30.

Daimler forecast that fourth-quarter operating profit will rise as the Mercedes CLA coupe, E-Class sedan and flagship S- Class win customers in a sign that Zetsche’s strategy is gaining traction. Third-quarter earnings before interest and taxes jumped 16 percent to 2.23 billion euros. Nine-month delivery growth at Mercedes exceeded gains at BMW and Audi.

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