Despite 2015 being the most successful year in the history of Daimler AG, its shareholders who recently met at the annual shareholders’ meeting in Berlin, are increasingly vocal about the threat posed by Silicon Valley companies including Tesla and Google. This discontent come especially in light of the recently launched “Model 3” – Tesla’s first mass-market car due to be delivered in 2017, with an estimated range of 346km on a single charge.

A shareholder is reported to have questioned why Daimler has no competitive product to combat Tesla’s momentum in the automotive market. “In the long term, we have some great vehicles…. but they are virtual at this point”.

Mercedes Benz F 015 research car (copyright: Daimler)

Others queried whether Daimler disposed of its shares in Tesla too early. Daimler bought a 9.1 per cent stake in Tesla in May 2009, before it went public (estimated $50m) and sold these in October 2014 for $780m.

Another threat is a shift in German’s allegiance to domestic automotive brands: according to the Financial Times, over 60% of 6,200 Germans who participated in an online poll by Autobild said “I want to have one”, when asked about the Tesla Model 3. Mercedes currently offers a fully-electric B-Class car and an electric Smart car, but neither is comparable in range to Tesla’s offering.

Chief executive Dieter Zetsche responded to these queries by reaffirming that Mercedes will have 10 plug-in hybrid vehicles for sale in 2017 and will launch an all-electric car with a range of 500km by 2020. And Daimler’s chairman Manfred Bischoff is reported to have said it was a “balancing act” to innovate in technologies while also maintaining their position as a leader in traditional premium cars. To facilitate their ambitions, Daimler has invested 500 million Euros in a new battery factory in Germany. This new battery factory will produce lithium-ion batteries for hybrid and electric vehicles for Mercedes-Benz and Smart and will start operations in summer 2017.

As Padmasree Warrior of NextEV mentioned in her recent interview with Bloomberg, the traditional automotive industry is certainly overdue for disruption and it seems the traditional players have finally been jolted into action by Tesla’s success.