Coming Soon: The Tesla-Based Mercedes

No car in the market today at any reasonable price (say, under $100,000) matches the Volt drivetrain's capability of driving 25-50 miles on electric, and then continuing like any other car.

One year from now, BMW will start to deliver the i3, which will be a variant of the Volt, but with a greater emphasis on the electric part rather than the gasoline engine. It will be the first really interesting such car, in my opinion.

You can think of it as this: A battery-electric drivetrain and a small gasoline/diesel engine go together like peanut butter and banana on an Elvis Presley sandwich. They complement each other almost perfectly. Drive on electric most of the time (90%, 99%, whatever) and then have the small gasoline engine ensure you never get stuck when you eventually have to drive longer.

So what about the all-electric car? There is some market for this already today -- just witness Tesla's sales success. I think all-electric cars can soon exceed 1% of the total car market, even without much incremental development of a charging infrastructure. Tesla, Toyota, GM, Ford, Mercedes, BMW and other brands will capture this market, and of course some of them have already started.

Just like Tesla helped Toyota ensure the Toyota RAV4 became an outstanding all-electric car, it is likely ensuring the new all-electric Mercedes becomes an outstanding car as well. It should be on sale in the first half of 2014 for what I estimate to be $46,000 before tax incentives.

The Tesla-based Mercedes will have enormous torque, silent and vibration-free operation, one-pedal driving with regenerative braking, and make for a near-zero maintenance experience over the car's lifetime. Just inflate the tires correctly, rotate the tires, eventually replace the tires -- and once every 200,000 miles or so refresh the brakes.

That's all there is to it. Range anxiety aside, an all-electric car has some very unique and positive properties.

At the time of publication the author had no position in any of the stocks mentioned.

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