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Tesla Is No Longer the Auto Tech Supplier It Once Was

March 8, 2016, 6:46 PM UTC
Tesla Model S
The Tesla Model S in the Globe parking lot. (Photo by Aram Boghosian for The Boston Globe via Getty Images)
Photograph by Aram Boghosian/The Boston Globe — Getty Images

Tesla is no longer the powertrain technology supplier to big auto it once was years ago. And that’s probably a good thing for the Silicon Valley company and the electric car industry as a whole.

According to the International Business Times, Mercedes-Benz won’t be working with Tesla for its next-generation B-Class Electric Drive.

Announced in early 2012, Tesla (TSLA) had been supplying electric powertrains to Mercedes-Benz, a division of German auto giant Daimler, for its B-Class electric car. Daimler (DDAIF) was also an early and important investor in Tesla.

But over the years—and following Tesla’s success—more large auto makers like Daimler have started to take electric cars much more seriously, and have sought to bring powertrain and battery technology in house. The head of electric car tech at Daimler, Harald Kroeger, told the German magazine Wirtshafts Woche (cited in IBT) that Mercedes-Benz has now invested over $550 million in its own powertrain and battery tech, and will be using its own tech for the next-generation car.

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The move isn’t surprising. Daimler essentially divested from its Tesla investments in late 2014. In Tesla’s 2014 annual report the company says that it has “substantially completed our development services under this B-Class program and commenced production of electric powertrains and battery packs for Daimler.”

As Tesla has grown larger, selling 100,000 electric cars by the end of 2015, the company has morphed from a Silicon Valley upstart that has intrigued some large auto companies, to being seen as a possible competitor to big auto.

Japanese auto giant Toyota (TM) was also an early investor in, and supply partner of, Tesla. Tesla sold powertrain tech to Toyota for an electric version of its RAV4 crossover.

Did Toyota make a worthy contender to Tesla’s Model S?

When Tesla was younger, particularly before it started selling its Model S car, the company courted these types of tech deals with big auto. Tesla needed revenue to help it transition into becoming a more mainstream auto maker. It also needed early investors before it went public.

But now Tesla is in a much different place. The company’s Model S electric sedan has been a big success, and Tesla just started delivering its next car, the crossover Model X. Later this month, Tesla plans to show off its fourth car, the lower cost Model 3, for the first time. The company has evolved into a small, but full-fledged automaker.

Despite rock bottom oil prices, electric cars have also become a more established industry. Researchers at Bloomberg New Energy Finance predict that a third of new cars sold by 2040 could be electric. Electric cars could represent a quarter of the world’s vehicles by 2040, the report suggests.

Large automakers around the world want to get a piece of that growing market. It’s only natural now that they now don’t want to be reliant on Tesla as their conduit into that sector.