Updated at 1:35 p.m. PT with corrected information on the supply arrangement and additional details.
Tesla Motors has signed a deal to supply power train components to Daimler for an electric version of the German auto giant's Smart mini-car, called the Electric Smart EV, which is expected to be available within two years.
Elon Musk, the CEO of Tesla, announced the deal at the North American International Auto Show in Detroit on Tuesday. On Sunday, Tesla unveiled a higher-end Sport version of its Tesla Roadster electric sports car.
Tesla will supply the battery pack and on-board charger for 1,000 Electric Smart EVs, a company representative said on Tuesday. Musk told told The Detroit Free Press that Tesla has been working on the deal for about a year and a half.
"If the 1,000 vehicle fleet makes sense and the economics are compelling, that will expand to tens of thousands of vehicles per year," Musk was quoted saying. Daimler "sees the electric Smart as being a large percentage of EV (electric vehicle) sales."
Tesla is ramping up production of its first car, the Roadster, while looking to earn money through its power train business. Daimler is its first auto manufacturer customer.
A deal between Tesla and Daimler had been rumored for months.
In August, Financial Times Germany reported that the supply agreement was for electric Smart cars planned for a pilot to test lithium-ion battery Smart cars and a network of charging stations in Berlin, Germany.