The quick rise of Tesla Inc. TSLA.O to become the world’s most valuable carmaker might herald the start of a new era for the global auto industry, defined by a Silicon Valley approach to software that is displacing old-school manufacturing know-how
Tesla Inc.’s meteoric ascension to become the world’s most valuable carmaker might herald the start of a new age for the global auto industry, defined by a Silicon Valley approach to software that is displacing traditional manufacturing know-how. Many investors were taken aback by Tesla’s meteoric climb. However, starting in 2009, officials at Daimler AG, Mercedes-parent Benz’s company, got a detailed look at how Tesla and its CEO, Elon Musk, were taking a novel approach to creating automobiles that challenged the old system.
In May 2009, Daimler, which bears the name of the man who built the modern car 134 years ago, purchased a roughly 10% investment in Tesla in a move that gave the struggling start-up a $50 million lifeline. That investment provided Mercedes engineers a behind-the-scenes look at how Musk was willing to release technology that wasn’t flawless, then continually upgrade it via smartphone-style over-the-air upgrades, regardless of early profitability.
Mercedes engineers aided Tesla in the development of its Model S premium automobile in exchange for access to Tesla’s partially hand-assembled battery packs, but Daimler sold its investment in 2014 due to concerns that Tesla’s approach could be scaled up. Tesla would go on to pioneer new production methods, software designs, and electronic architecture, allowing it to deploy advancements faster than competitors, prompting experts to draw parallels with Apple.
The brief collaboration, according to three people directly involved with the Mercedes side, highlighted the clash of old and new engineering cultures: the German obsession with long-term safety and control, which rewarded evolution, and the Silicon Valley carmaker’s experimental approach, which embraced radical thinking and fast innovation. “In terms of the ferocity with which he pushes particular technologies, Elon Musk has been walking on the edge of a razorblade,” said a former Mercedes engineer who worked on the alliance.