Tesla Motors Inc (TSLA)’s Divide And Conquer Strategy: Partnership With Mercedes-Benz To Confront Bayerische Motoren Werke AG (BMW)

Bloomberg has depicted an estimate proposed by IHS Automotive that predicts the electric vehicle market to more than quadruple to about 1.02 million units by 2020. Bayerische Motoren Werke AG (BMW) has some time since it has been ready to address some of the demand with its i3 Model.  Mercedes-Benz on the other hand, decided not to reinvent the engine and asked Tesla Motors Inc (NASDAQ:TSLA) to work some miracles under the hood of its B-Class.

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Last month the Stuttgart-based manufacturer sold its $780 million stake in Tesla Motors Inc (NASDAQ:TSLA) and many feared that the relationship between the two has cooled, but it seems that the later will still be supplying engines and batteries for the Mercedes-Benz hatchbacks. The implications resulting from this cooperation are two-fold. The economical ones are pretty straightforward, the company does not waste precious time and resources to produce what is already available at a more than decent quality and at a, probably, lower price. However, there are notions of pride and professionalism that might affect the customer’s perception. Some buyers might have a problem with purchasing a luxurious product from an affluent company that needs to ask Tesla Motors Inc (NASDAQ:TSLA) do the actual job.

Bayerische Motoren Werke AG’s model costs about $41,350 in the US and Mercedes-Benz’s B-class will be at a similar price level. Tesla Motors Inc (NASDAQ:TSLA)’s Model 3 is also expected to come out in the same range and pose pressure on the two manufacturers, but this will not happen in the next 2 – 3 years. It’s quite dubious why Elon Musk would help a competitor make a product that might compromise his company’s profits. Probably, Tesla Motors Inc (NASDAQ:TSLA) is more than sure that the future of automotive is powered by Li-Ion batteries and that people will be mesmerized by the capabilities of futuristic vehicles and his company will inevitably sell out of its cars. Moreover, as the Gigafactory has an immense capacity, which many regarded as excessive, the company can afford to give a helping hand to others.

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