Daimler is taking a 10 percent stake in Tesla Motors, a U.S. based electric car start-up, as it expands its green auto business, the head of Daimler's research department said on Tuesday.

The German luxury auto maker is paying a double digit million dollar sum for the stake in the American firm, said Thomas Weber, declining to be more specific.

Daimler had already partnered with privately held Tesla in January to develop battery packs and chargers for electric cars.

The carmaker was reacting with the deal to plans by President Barack Obama to increase auto fuel efficiency, Weber said.

With the surge for climate friendly cars, Tesla has seen orders soaring and had said in February it expected to be profitable by mid 2009.

As part of its move into electric cars, Daimler is set to start production of the second generation of the electric version of its Smart minicar brand by the end of this year, Weber said.

The first car of its main brand Mercedes Benz with an electric engine will be presented in 2010.