US electric carmaker Tesla Motors has confirmed that it is teaming up with German automotive manufacturer Daimler AG to develop an electric Smart microcar. Tesla will produce the battery pack and charger for the Smart electric car.

Tesla’s CEO, Elon Musk, revealed that the two companies have been in talks about producing the vehicles for lease customers since 2007. Under the current agreement, Tesla will initially make 1,000 vehicles available for sale in the US by the end of 2009. ’If the 1,000-vehicle fleet is a success and the economics make sense and the product is compelling, that will expand to tens of thousands of vehicles per year,’ Musk explained.

Daimler’s Smart fortwo has been a huge success since its launch in the US in January 2008, when soaring gas prices made the $12US,000 vehicle a preferred choice for the US buyers, taking total sales to 24,000 by the end of 2008. Banking on this success, Daimler plans to launch the electric version of the Smart by the end of 2009, although the selling price of the version has not yet been confirmed. Musk emphasised that ’Daimler is really looking at this as a very serious product’.

Meanwhile, Daimler has also recently partnered with Essen-based Evonik Industries for research, development and production of lithium ion batteries for its electric cars, although the deal is so far limited only to electric Mercedes Benz cars. However, the partnership could be extended to serial production of cars and trucks, Daimler confirmed earlier in January.

Musk has stressed that the deal will not be exclusive to Daimler. The electric carmaker is looking forward to establishing more strategic relationships with other automakers. Industry experts see deals like these as essential to Tesla’s survival, given that almost all US manufacturers, ranging from General Motors to smaller Fisker Automotive, are coming up with plans to bring electric and plug-in hybrid to the market. As such, Tesla’s partnership with several manufacturers is likely to make the manufacturer more competitive in the market. Musk also confirmed that the company is ready to supply ’major car companies with [its] electric powertrain technology’.