The plan behind the 10 percent acquisition of Tesla is for Daimler AG to ramp up its own electric car production.

Fresh from launching a lithium-ion hybrid saloon, Mercedes-Benz has bought 10 per cent of electric carmaker Tesla.

The US-based Tesla, which uses lithium-ion batteries and the Lotus Elise as its donor vehicle, is the only producer of highway-capable electric cars in the North American and European markets.

Mercedes-Benz parent, Daimler AG, says it bought the stake and will form a co-operative to make and develop battery systems, electric drivetrains and vehicles.

Tesla provided technology to create the Daimler-owned electric Smart car.

Daimler has 100 Smart electric cars on trial in London and later this year will start production of 1000 versions.

This year Daimler is also starting small-series production of the Mercedes-Benz B-Class with a fuel-cell drive system.

In 2010 it will introduce its first battery-powered Mercedes-Benz and from 2012, Daimler plans to equip all Smart and Mercedes-Benz electric vehicles with its inhouse-produced lithium-ion batteries.

In 2004, Tesla began development of its first electric vehicle, the Roadster, which remains the only highway-capable EV for sale in North America or Europe.

The Tesla Roadster is the first production battery electric vehicle to travel more than 320km per charge. It accelerates from zero to 100km/h in about in 4 seconds.

Tesla will start making its four-door Model S in California in late 2011.