Daimler CEO Dieter Zetsche has decided not to have his company invest in electric-car battery-cell production with other German brands, at least for the time being.

His reasoning? Overcapacity in the market.

“The dumbest thing we could do is to add to that overcapacity,” Zetsche said earlier this month in Stuttgart, according to Automotive News.

“Contrary to the expectation four or six years ago when everyone thought that the cells would be a rarity that could even be used as a tool of industrial policy, there is de facto a massive overcapacity in the market today and cells have become a commodity,” he said.

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The idea of German automakers combining on battery production became a bit of sensitive issue in the country in November, after German Economics Minister Sigmar Gabriel said Tesla head Elon Musk had talked about state subsidies for a possible battery plant in the country.

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Supporters, which include German labor unions, argue that a joint-venture which help achieve economies of scale that would make electric cars more affordable while also keeping tech expertise centered in Germany.

Many cells used in current German plug-in hybrids are sourced from Asia – and at least one model, the Mercedes-Benz B 250 e, sources its whole powertrain from Telsa.

Zetsche was open to the idea when it was first floated by Audi CEO Rupert Stadler. But high costs and low volume forced the company to shelve its Li-Tec cell. Now, Zetsche is taking a wait and see approach on which cell tech – lithium-air, lithium-sulfur, solid state, or something else – becomes the go-to tech.

“No one can say which of them will achieve a breakthrough. We all think it could take three to five years just for researches to reach that point, and five to ten years before it’s available on an industrial scale,” Zetsche said, according to Automotive News.

Automotive News