Coming Soon: The Tesla-Based Mercedes

NEW YORK ( TheStreet) -- One year from now, Mercedes will launch its all-new electric car that has been co-engineered with Tesla ( TSLA).

What is this car, and why is Mercedes staking its future on Tesla?

One occupational hazard of living where Tesla test-drives its cars under development is that as long as I'm not asleep or fetching stuff from the basement, all I need to do is to look out the window and every few minutes I will see these cars passing by. So for over a year now I have been looking at the future Tesla-based Mercedes as often as every hour, whether I like it or not.

Sometimes, the Tesla-based Mercedes test cars are parked on a public street. I took this picture (among many) last October:

This Tesla-based Mercedes is of a similar size and shape as Ford Motors' ( RIMM) C-Max, which is sold as both a regular hybrid and as a plug-in hybrid version -- and which I recently drove 1,247 miles in a high-speed endurance test.

In other words, it's a short and somewhat tall station wagon.

Obviously, unlike the Ford C-Max, this Mercedes is a pure electric car. The batteries are, just like in the Tesla Model S, laying flat inside the floor, which is about 5 inches to 6 inches thick.

Tesla also helped Toyota bring to market an all-electric version of its very popular RAV4 small/medium-SUV. Only 2,600 of those cars are being made, and sales started last September. I have driven this outstanding Tesla-based Toyota ( TM) on multiple occasions.

I highly recommend the Toyota RAV4 electric to anyone interested in an all-electric car, and for whom 110 miles of range will fit the intended purpose.

The main difference between the Toyota and the Mercedes is this: In the case of Toyota, Tesla took an existing car and re-designed it to make it an all-electric car. In the case of Mercedes, it looks like Tesla took part in the engineering from Day 1 and is therefore able to better optimize the car for all-electric duty.

How will this manifest itself in terms of differences between the Toyota and the Mercedes? The Toyota has a 42-kW battery, and judging from crawling under the Mercedes on a reasonably clean street, I'd say the Mercedes has a 36-kW battery.

42 kW vs. 36 kW: So does this mean the Mercedes will have slightly less range than the Toyota's 110-mile average? Not necessarily. There are a couple of reasons for this:

1. The Mercedes is a more aerodynamic car and sits lower to the ground. Once you start going above 50 miles per hour or so, aerodynamics matter more, and this should help the Mercedes perform more economically than the Toyota, especially on the freeway.

2. Seeing as it appears Tesla was part of the engineering of this Mercedes from Day 1 as opposed to it being an engineering after-thought, it should be able to optimize the weight of the car better. I would not be surprised to see the Mercedes be at least 200 lbs lighter than the Toyota. This should compensate for the smaller battery in the Mercedes.

All in all, I would not be surprised to see the Mercedes equal or better the Toyota's typical 110-mile average range, despite the slightly smaller battery. My guess is the Mercedes could average 120 miles, which would put it almost on par with the base Tesla Model S.

I didn't take any pictures of the Tesla-based Mercedes interior but I looked at it carefully and it looks just like any other Mercedes B-Class car, which is sold in Europe and Canada. In my view, it is reasonably pleasant. The driving position is great and it's easy to get in and out of the car, thanks to the car being a little bit tall just like the Ford C-Max.

What about the Chevy Volt comparison?

I have driven almost 21,000 miles in the General Motors ( GM)Chevrolet Volt, and I have also driven almost every other electric and plug-in electric car in the market, cumulatively thousands of miles.

In my view, it takes a lot of commitment to drive an electric-only car. You have to constantly think about the remaining range, especially in the context of an unscheduled trip or re-routing coming up.

In my view, as long as the number of available electric charging stations is too low to not having to think about it, a plug-in hybrid car is far more realistic than an all-electric car. This is where the Chevrolet Volt comes in. The Volt is in most relevant ways a zero-compromise car. It gives you 25-50 miles of pure electric drive, after which you can drive another 340 miles on gasoline. Refuel at any time, as necessary. Nothing to worry about, ever.

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.

This article was written by an independent contributor, separate from TheStreet's regular news coverage.

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