Last week, German auto giant Daimler AG (DDAIF 1.85%) announced a notable $1 billion investment in electric vehicle and battery production. Daimler's Mercedes said in a press release that it believed the investment delivered a "clear message" about its commitment to "be on the cutting-edge of electric vehicle development and production."
But Tesla's (TSLA 0.88%) co-founder and CEO Elon Musk was disappointed with the commitment. "That's not a lot of money for a giant like Daimler/Mercedes," Musk tweeted over the weekend. "Wish they'd do more. Off by a zero." In other words, Musk thinks Daimler should be investing $10 billion instead.
Image source: Tesla.
But now Daimler is firing back on Monday. "You're absolutely right [Elon Musk]," Daimler tweeted back. In the tweet, the company said it is investing more than $10 billion in next-generation electric vehicles, with over $1 billion slated for battery production. Musk seemed happy with the bigger commitment, responding, "Good."
However, even after Daimler's additional zero, the German automaker may still be undershooting.
Daimler's bet
The German automaker's new $1 billion investment announced last week will feature production capacity expansion at its Alabama facility to build its EQ-branded electric SUV. Production of the electric SUV will better position Mercedes to compete with Tesla's growing presence in the premium market. Sales of Tesla's Model S sedan and Model X SUV have catapulted to compete with top-selling, comparably priced luxury sedans and SUVs. Furthermore, Tesla's recently launched midsize sedan -- the Model 3 -- will threaten premium vehicles at a lower price point, like Mercedes' C-Class.
"With the addition of electric SUVs to our future fleet, we will provide discerning drivers with a new, high quality automotive option that will marry performance, luxury, and environmental stewardship," Mercedes said in a statement about the expansion.
Daimler's Generation EQ concept of an electric SUV. Image source: Daimler.
In addition, the investment includes a new 1 million-square-foot battery plant near its Alabama auto factory. Daimler will start construction on the factory next year, and it plans for operations to begin by 2020.
Together, these new U.S.-based investments will enable Mercedes to start producing electric SUVs by "the beginning of the next decade," the company said. "EQ models will be integrated into the series production at the plant. This is possible because of the early investments in flexibility and technical equipment at the plant that offer trailblazing Industry 4.0 technologies."
As Daimler clarified on Monday, its total planned investment for global electric vehicles is more than $10 billion, with $1 billion slated for battery production.
Tesla is moving quickly
Daimler still has lots of catching up to do when it comes to spending on electric vehicles if it wants to catch up to Tesla.
It was over three years ago that Tesla announced its plans for a $5 billion battery factory called the Gigafactory. And Tesla has moved quickly on the investment. Initially targeting battery output at the factory to be capable of supporting production of 500,000 vehicles by 2020, the electric-car maker has moved this target two years earlier, to 2018.
Rendering of a finished version of Tesla's Gigafactory. Image source: Tesla.
The Gigafactory obviously dwarfs Daimler's plans to spend over $1 billion on global battery production. Tesla's impressive investment in battery production is particularly evident from the estimated 15 million square feet of operational space the building is supposed to have when it is finished -- 15 times the size of Daimler's planned battery factory. Of course, the factory isn't finished yet. Today, its operational footprint is only about a third complete. But there are no signs of Tesla slowing down, as the company expects its vehicle production to climb fivefold by the end of next year.
But Tesla believes that even this aggressive construction on its $5 billion Gigafactory is only the beginning. In the electric-car maker's annual shareholder meeting earlier this year, Musk said Tesla wants to build several Gigafactories in the near future and as many as 10 to 20 over the long haul.
In addition to Tesla's Gigafactory spending, the electric-car company will need to spend billions to achieve its goal of increasing production capacity fivefold to 500,000 units by next year, putting the electric-car maker years ahead of Mercedes' plans for achieving high-volume EV production. And Tesla doesn't want to slow down at 500,000 annual units. It's aiming to build 1 million electric vehicles per year by 2020.
To this end, Tesla's capital expenditures have been soaring. In the trailing 12 months, Tesla has spent $1.5 billion on capex, and it plans to spend $2 billion in the second half of the year. That $2 billion in just six months will allow Tesla to "make milestone-based payments for Model 3 equipment, continue with Gigafactory 1 construction, and expand our Supercharger, store, delivery hub, and service networks," the company said in its most recent shareholder letter.
Mercedes' plans for investing $10 billion in EVs is noteworthy, but Tesla is already well into its big bet on an electric future -- and its investments will likely only get bigger.
