German automaker Daimler AG acquired an equity stake of nearly 10 percent of Tesla Motors Inc. the San Carlos California- based manufacturer of all electric vehicles, the companies announced Tuesday.

Through the partnership Tesla will supply its lithium-ion batteries and charging electronics to Daimler which will use it for the first 1,000 units of its smart car to be deployed later this year.

Daimler will cooperate with Tesla in a number of areas, including leveraging its engineering, mass production and supply chain expertise. Tesla is also said to be interested in Daimler's lithium-ion pouch-cell battery.

We are about to combine the best of the old and new school, Thomas Weber, Member of the Board of Daimler AG, said in Stuttgart, Germany in a press conference Tuesday.

Our strategic partnership is an important step to accelerate the

commercialization of electric drives globally, Weber said separately in a statement.

The cooperation would accelerate the production of Tesla's second vehicle, the sedan Model S, Elon Musk, Chief Executive of Tesla said. The company is applying for a $350 million federal loan to begin the car's manufacturing due on 2011.

As part of the collaboration, Prof. Herbert Kohler, Vice President E-Drive and Future Mobility at Daimler AG, will take a seat on Tesla's board of directors, the companies said.