Daimler-Renault cooperation faces battery challenge

Daimler AG Chief Executive Officer Dieter Zetsche says the German company will become a leading manufacturer of electric-car batteries. Trouble is, his new business partner Renault SA CEO Carlos Ghosn has the same idea.

Both chiefs have vowed to produce the best power pack as they begin working together to jointly develop electric cars, creating a potential conflict in their budding cooperation before it even starts.

Daimler and Renault, which swapped 3.1 percent stakes last week to seal a joint vehicle and engine development agreement, left batteries out of the deal. Each side will instead vie for the right to install their power packs in electric-powered Smart and Twingo cars they will jointly develop by 2013.

"Daimler has been a company that has traditionally been reluctant to give up its own technology path," said Anil Valsan, the London-based director of automotive research at Frost & Sullivan. "While Daimler's battery may have a technical edge, Renault-Nissan's solution may end up being more cost competitive."

Daimler, the world's second-largest maker of luxury cars, and Renault, France's second-biggest carmaker, both regard the technology for storing and managing electricity as critical in the shift to pollution-free driving. Batteries, rather than engines, will be the "heart" of future vehicles, Thomas Weber, Daimler's development chief, said in a March interview.

Along with Renault, Stuttgart, Germany-based Daimler plans to work with BYD Co., the Chinese carmaker backed by billionaire Warren Buffett, to build an electric vehicle for China and team up with Evonik Industries AG to develop electric power packs.