Why Did Daimler Sell Its Stake in Tesla?

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With fewer than 200 units of the Mercedes B-Class sold through September, the German luxury automaker would not appear to be a competitor for Tesla Motors  in the electric vehicle space. However, Tesla’s ambition as a car company expands beyond the EV industry, and Mercedes parent Daimler AG (OTC:DDAIF) brought the company’s relationship as constructed to a close with the sale its 3.9% stake in Tesla, Bloomberg reports. Daimler’s decision to divest its stake in Tesla signifies a shift in priorities in the electric vehicle division, as well as opportunity to cash in on the EV company’s robust stock price.

Tesla as technology supplier

Mercedes B-Class Electric Drive cars, the company’s first fully electric vehicles, use technology provided by Tesla. Now that the cars have been released to limited markets in the U.S., Mercedes may be taking a step back from the segment. Toyota’s partnership with Tesla recently ended after the all-electric RAV4 was phased out of production, though the Japanese automaker retained its minority interest in Tesla;  a relationship between the two may one day be rekindled.

Mercedes has a bigger challenge on its hands from Tesla in the luxury vehicle space. As the EV maker prepares its rollout of the Model X crossover, automakers are bracing themselves to combat a more disruptive force in the luxury segment. Crossover sales are soaring across the world, and Tesla has the hottest new item set for release in 2015. Still, there was no sign from either automaker that general collaborations were ending.

“Our partnership with Tesla is very successful and will be continued,” Daimler Chief Executive Dieter Zetsche said in a company statement announcing the sale of Tesla stock.

Source: Mercedes Benz USA

Cashing out on a savvy investment

The other side of Daimler’s divestment is its healthy take from the sale of Tesla stock. According to the company’s announcement, the sale will bring in $780 million. Daimler’s original investment amounted to $50 million, for which it received 9.1% of Tesla stock during its startup phase. That startup past received its share of space in the announcement of the sale.

“We have supported Tesla as a startup company for many years and have learned a lot from Tesla,” said Thomas Weber, a Daimler board member. “At the same time, Tesla was able to profit from our automotive expertise.”

As a reminder of the company’s presence in the electric vehicle space, Daimler noted it had “the industry’s biggest portfolio” of EVs when considering the Smart Electric Drive, Mercedes fuel cell vehicles, hybrids, and fleet vehicles in addition to its B-Class. While these cars and trucks might not represent major forces in the EV industry, the statement highlighted the achievement of Tesla at the current stage of its development. Besides making most electric cars seem inadequate, the Model S has managed to pull in consumers who might otherwise be shopping for Mercedes E-Class or S-Class sedans.