What the Tesla-Toyota Partnership Means, and Doesn’t Mean

News that Tesla and Toyota will work together represents a giant step forward in the development of sustainable electric-drive automobiles. In recent years, the two car companies have occupied the opposite ends of the spectrum: the ultra-conservative corporate behemoth that has dominated green car sales for nearly a decade—and the ultra-adventurous start-up with big ambitions.

Toyota will buy $50 million of Tesla’s common stock, but more importantly it will be purchasing the company’s sense of daring and adventure. “When we look at Tesla’s venture business spirit, we recall how Toyota started back in the day,” said Jana Hartline, Toyota’s environmental communications manager, in an interview with HybridCars.com. “Toyota would like to learn from the challenging spirit, quick decision-making, and flexibility that Tesla has,” Toyota President Akio Toyoda, said in a press release.

What does Tesla get out of the deal? Simple: more legitimacy. It was almost exactly one year ago today that Daimler took an equity stake of 10 percent in Tesla. That was a big vote of confidence for Tesla, especially during a time when it had delivered very few vehicles.

Toyota’s investment represents about a 2 percent stake in Tesla, according to Hartline. Yet, it represents an even bigger pat on the back for Tesla, as the company moves forward to produce its first electric sedan back by millions of dollars of government loans. Cynics could view the announcement as a PR move to bolster the company’s image as it plans its initial public offering.

The partnership gives both companies a boost in public perception. Toyota in particular could use a boost after a recent safety scandal threatened its reputation as not only the greenest car company but also one of the safest. But green car fans should not begin speculating about specific Toyota-Tesla electric cars—as cool as some kind of Prius Roadster or Tesla Hybrid might be. Hartline told us that any details beyond the most basic agreement to share and collaborate on parts and production systems have not “been hammered out.” In terms of Toyota’s plans for a pure EV, it is still focused on a “limited range urban commuter car,” according to Hartline.

Tesla also announced that it will acquire the NUMMI plant, in Fremont, Calif., where Toyota and General Motors until recently produced as many as a half-million vehicles per year. But there were no details about how Tesla would utilize the facility beyond its hopes to produce 20,000 future electric models per year beginning in 2012. The plant was shuttered in March, idling 4,700 workers. Tesla could eventually hire thousands of workers to produce vehicles at NUMMI. “We’re going to occupy a little corner [of NUMMI],” said Tesla CEO Elon Musk. “But there’s a lot of room for growth, and long-term we intend to use the full capacity of NUMMI.”

Gov. Arnold Schwarzenegger, who was in attendance at the partnership announcement, recognized the unique attributes of the two companies; the merger of the two can provide a glimmer of hope that the spirit of the companies could one day merge into a common vision of green car efficiency, chic and affordability. “The Prius is an extraordinary car that goes more than 50 miles per gallon. That was revolutionary,” Schwarzenegger said. “And we have Tesla. I talk about that sports car in a lot of environment speeches. You can do something that is very sexy looking, that goes from zero to sixty in less than 3.9 seconds and something that is attractive.”

“We love both of those forces, that build great cars, that now come together,” Schwarzenegger said. Beyond this symbolism, nothing much changes in terms of the vehicles each company will produce.


  • AP

    This should give Tesla some sorely needed technology, and provide a shot in the arm to California, in reopening the NUMMI plant. Good for them!

  • keith

    I keep hearing about these start up companies with great electric or hybrid drivetrains but no affordable vehicle to put them into because it costs so much to build from scratch. Why not buy out the Saturn vehicle system and put electric drivetrains in them? I’m missing something here? Just curious. Would love to get away from the whole dependance on oil thing!!!

    Keith.

  • DutchInChicago

    That gives Toyota some sorely needed technology. About time that they get serious about electrical cars. I love what Toyota have done with the Prius but my next car will be an electrical car and I had hoped that I would have been a Toyota but it looks like it has to be a Nissan now.

  • Samie

    keith
    I honestly think the Saturn brand is over. About five years ago, I thought Saturn could have been GM’s hybrid product line but the bull-headed insistence on marring the 2-mode system and the underfunding of this brand killed any chance of Saturn being the ‘green or fuel economy brand’ for GM.

    Toyota the maker of Lexis, and Daimler the maker of Mercedes-Benz are competitors of Tesla. The Tesla Roadster is not much of a threat but the new Model S at 50k is. Tesla needed the capital but when shares go public I wonder if investors beyond major industry insiders will buy ‘bulk’ stock in this company? As an investor, I would be wherry about major competitors co-mingling in the operations and long-term business strategies at this company. Despite only 2%, Toyota’s real intentions is to keep a watchful eye on Tesla becasue of the Model S, not some wild fantasy of Toyota changing their short-term position on pure EV’s. Man the public relations team at Tesla and Toyota are top notch for spinning this to their advantage, outstanding work.

  • Samie

    To the editors of this site, will there be clarification about this agreement in an article today? Meaning that many sites are reporting a Toyota/Tesla made EV under 30k is in the works. Is there any truth in this? And does the partnership with Daimler complicate a possible Toyota/Tesla EV?

    Samie

  • Anonymous

    Samie,
    Tesla has mentioned future plans for a $30,000 electric car, after the company produces the $58,000 Model S, which is still at least two years away. Based on our conversations with Toyota, discussions between the two companies regarding collaboration on any electric vehicle are in the very early stages. Could it happen? Maybe. But at this stage, it’s best to take a wait-and-see attitude. Keep in mind that Daimler owns a much bigger stake in Tesla than Toyota will, when its $50 million investment takes place. Any speculation about specific vehicles right now is pure guess work.
    Bradley Berman, Editor
    HybridCars.com

  • Old Man Crowder

    Mr. Berman beat me to it… I was going to remind everyone that Daimler owns a much bigger share of Tesla than Toyota, so I’m not sure why we’re getting so excited about this development.

    Is it just because Toyota has a reputation/experience with electric propulsion; moreso than Daimler?

    Don’t get me wrong… I think this is great boost for Tesla and perhaps for the electric car movement in general. I’m just trying to keep things in perspective.

  • DanTou

    Maybe I have a pink world in my head but…

    Maybe Tesla will get some help from Toyota for crash ratings, drag coefficent, manufacturing efficiency, … Anything not related to EV.

    Toyata will get help with EV technology.

  • Peter Mr.Metal Archer

    This is REVOLTING ! Toyota is “gasping for air”, to use akido Toyoda’s own words, as they go down the drain from Years Of Defective & Dangerous vehicles built for Greed. Now here they come to a truly innovative company that just lost the Top Executives in a plane crash, with a “Basketful of Money” to Buy their way into a REAL Electric Car Company, because OBVIOUSLY the so called “Hybrid” cars Toyota produces now are total BS. Unlike the Chevy VOLT, which is about to take Over The World by Storm….Toyota is shaking in their boots !!!

  • DownUnder

    Thankyou Mr Metal Archer for your bias comment.
    You like the Volt, that’s fine but to say Toyota hybrid cars are total BS is a bit subjective. Put the Volt on the market and let the consumers decide.

  • robert burke

    What the USA needs is a $10,000 hybrid in every garage.

  • ex-EV1 driver

    “What the USA needs is a $10,000 hybrid in every garage.”
    What this country needs are people with a little education, real world experience, as well as common sense who can realize that the only way a real car (hybrid or otherwise) could ever be sold for $10,000 would be if it (and all of it’s components) was built by slaves or built of uobtanium.
    Get real, you may WANT a hybrid for $10,000 but why not also want a luxury yacht and your own private jet for $10,000.
    Don’t be greedy. Expect to pay for what you get. Even $20K for a car is a bargain if you look into all that goes into a car.
    Go Tesla!

  • Zam

    This is a great idea in theory. The only real problem is that the average “real world” person cannot afford these vehicles. People don’t have jobs and the jobs some do have just do not pay enough to justify these costs. They would be repossessed in a heartbeat.

  • Capt. Concernicus

    Peter Mr.Metal,

    Thank you for showing us how you’ve been brainwashed by GM’s propoganda machine. Can you remind me which company filed for bankruptcy last year? How about which company’s last profitable year was 2005? Which one of those two companies that metntioned is not the hyrbrid leader?

    robert burke,

    “What the USA needs is a $10,000 hybrid in every garage.”

    –Yes, and while we’re at it, houses for only $40,000, stamps for just $.05 and a gallon of milk for just $1.25. Maybe we can also bring back disco and the 8-track. *sarcasm alert*

  • ex-EV1 driver

    @zam
    I believe that we need to go beyond Me, Now to Our Future. Even if only a small number can afford something like this today, a good thing is still good.
    Swapping of only 10% of the expensive new cars sold with EVs will immediately put price pressure on gas prices – all will benefit.
    EV prices will drop with mass production, just as computer, cellphone, TVs, Steroes, etc did. This will provide a sustainable, affordable future for all.

  • Anonymous

    When is Tesla stock available to the public? TXL?

  • Anonymous

    This doesn’t appear to be a merger of any kind it is simply an investment in Tesla. No matter the way you look at it one great positive is this will give Tesla much needed cash that will help them move forward. I wish I could buy a Tesla, what a cool car.

    Also I have to mention that Mercedes was only jointly owned by Chrysler from 1996-2007, a merger that was likely far better for Chrysler then it was for Mercedes. Mercedes is now once again solely owned by Daimler as in 2007 they sold off Chrysler to a private equity firm who specialize in auto manufacturer turn arounds.. This turn around doesn’t seem to have been effective just yet.

  • david

    Who wants a Saturn? Yuck.

  • Paul J

    I;m still waiting for a Tesla with a solar panel. Regardless of what it cost, it would pay for itself since driving it to work and leaving it in a parking lot in Arizona for 8 hours would be more than adequate to charge it for the ride home and back. With a 6 year battery life (assumed) I would be driving free for 6 years. Do the math. Green as you could get.