A long standing collaboration between Mercedes and Tesla, will spawn a production version of the Mercedes B Class E-Cell, according to a Tesla employee reporting to the website GREON7 (which we suggest you do not open unless you speak Dutch).
Daimler, the parent of Mercedes (and SMART) fully owns 9% of Tesla as part of an assistance/co-operation program from 2010. A partnership that Tesla CEO Musk says was the salvation for the company. Besides a nice return for Mercedes on their money since the company went public (9% is now worth almost $300 million), this car is the first physical seeds of that investment.
Tesla will apparently provide the entire powertrain for the B Class E-Cell, including the packs themselves.
Worth noting is that the prototype E-cell's electric motor was only 50 kW, probably not an acceptable level of performance in the real world. 0-60 km (thats 37 mph) took almost 6 seconds to achieve.
The Mercedes B Class E-Cell will likely be produced sometime in 2013, initially on a limited volume, and to select customers. According to Tesla, the volume and scope of this project has been confirmed to be larger than work with Toyota on the RAV4 Ev.
EDIT: Updated Info (07/02)