Has Daimler Decided To Use A High End Lithium Utilizing Hybrid Mercedes To Head Off Tesla?

Implications: Any new battery technology for use in a passenger or freight carrying vehicle will start out as very, very, expensive; its cost of development and prototype production will have to recovered somehow in the selling price of the cars. Assuming even that Daimler corporation has in hand, or is extremely confident that it has under way, some appropriately sized working 'lithium batteries' upon which it is willing to base some limited production then why, in opposition to Toyota's original introduction of nickel metal hydride batteries at the low to mid-level of vehicles, is Daimler going to release a 'flagship' model hybrid with the battery developed by Continental?  

Analysis: Tesla Motors, a silicon valley startup and upstart, has clearly rattled Daimler-Benz. So much so that the one time ultraconservative Marque, Mercedes, is going to be used to jump to the head of the luxury segment hybrid line in an attempt, I think, to head off Tesla's potential encroachment on the very visible California luxury and 'halo' market.

This says much more about Tesla than it does about Daimler. 

First of all let's note the key difference between the Tesla 'Roadster' and the just announced Mercedes S-Class 400 BlueHYBRID, which is a hybrid version of a gasoline engine powered top-of-the-line Mercedes with impressive performance characteristics along with better fuel economy and lower emissions of CO2 than its purely gasoline engine powered sister car.

The Tesla is 'to be' an all electric car; it is to be powered by batteries only and will need a special charger to avoid needing an overnight-plus charging time from a house circuit.

The Tesla will have better performance than the S-400 BlueHYBRID, but it will not have even a tiny percentage of the sales and service network of Mercedes. Nor will it have Mercedes vast experience at building luxury cars the bodies of which don't squeak and the power train components of which work together seamlessly after more than 100 years of Daimler experience. 

The S-400 BlueHYBRID is targeted at a market, which has always paid top dollar for top quality.

Moreover Daimler has already announced that one year after the S-400BH goes into production and on sale the next additional model, the S-300 BlueTec HYBRID will be introduced for those buyers who want the even better fuel and emissions characteristics delivered by the Blur Tec diesel engine system already offered on Mercedes vehicles.

It seems to me that Daimler is not bringing out these new hybrid S-class sedans in competition with Cadillac, which is supposedly bringing to market its top class sedans in hybrid variations including gasoline engine and diesel engine versions as well as possibly an all electric version. Nor do I think that Mercedes feels threatened by the new top class Lexus L hybrid. I think that Daimler feels the urgent need to force upstarts such as Tesla out of the market before it can gain any kind of foothold.

This means, I predict, that Mercedes will not add the real cost of the first lithium batteries into the price of its first S-class hybrids. Tesla will on the contrary be forced to do so. This will mean that one can buy a high performance luxury sedan seating four adults comfortably for the same price or less than a two passenger Tesla. Even if the Tesla is somewhat cheaper it cannot give the same quality, service, comfort, or reliability that a Mercedes can.

Assuming that Tesla has a battery system available to it from a company of the high standards of Continental it will not be possible to put the true cost of the batteries into the first selling price of the Tesla, which Tesla must do if it is to have a hope to survive and to raise the enormous amount of capital it will need for sales and service.

Advantage, set, and match Mercedes.

Do you think that this project was so expensive for Daimler that it had to sell Chrysler in order to be assured of having the cash to carry it off? I do.