"I suspect Mercedes might be interested in making a competing model to the Tesla, for the same market.".
Why do you suspect such a surprising thing might happen, of course they will, like every car maker in the world.
But you are right, people who want and can afford a car like Tesla or similar will get one regardless of any subsidy. If any subsidy is used it should be where the volumes are.
PS. Caps are shouty and always fail their purpose.