By on May 21, 2010

A lot of people have been shaking their heads at the Toyota/Tesla deal. Was it just an elegant way to unload the NUMMI plant? As in “here are $50m, please buy my plant with it?” Or is it part of a grand strategy, the beginning of Toyota’s foray into an all-electric future? As usual, the truth is stranger than business plans.

Akio Toyoda is a car guy. He drives around 200 different cars a year. That’s a different car every other day or less. If he wouldn’t be the scion of the world’s largest car company, Toyoda would count as a car otaku, as they say in Japan to a car nut. He has his own race team, Team Gazoo. Even blogs on the team’s website. The team fields two Lexus LF-A, and makes a regular appearance at the 24 Hours Nürburgring endurance race. This year, Toyoda officially did not race. Officially. Folks who were at the Ring last weekend swore they saw, at a minor event, a little Japanese guy with glasses behind the wheel of an LF-A. I know, they all look alike. But I have it on good authority that it was Akio Toyoda, who just couldn’t help it.

What does this have to do with Tesla? About a month ago, “Mr. Toyoda mentioned to one of our engineers that he would like to drive a Tesla roadster,” said Paul Nodasco, spokesperson at the Toyota HQ in Tokyo, to TTAC. A visit and a test drive was quickly arranged. If you listened to Toyoda’s remarks during the announcement, you heard him say that “during a visit here earlier this spring, Mr. Musk kindly gave me an opportunity to drive one of Tesla’s electric vehicles.” That was the polite version of Toyoda’s desire to get behind the wheel of one of the rare electro-cars, and Musk jumping to the occasion and into the passenger seat.

As the Remington Razor tag line goes, Toyoda liked the roadster so much, he bought the company. Well, part of it. How big a share Toyota got for their $50m has not been announced. Toyota sees the engagement as a typical venture capital play: If it works, it will pay back in droves. If it doesn’t, what are $50m? About three fines to the DOT, going to a worthier cause. At the announcement, Akio Toyoda recalled that “decades ago, Toyota was also born as a venture business, and grew over the years.”

According to sources at Toyota, any speculations about future cars are just that, speculations. Between the test drive of the roadster, and yesterday’s announcement were just a few weeks, barely enough time in the corporate world to process a purchase order for a load of hanging file folders. Any cars or technologies will be jointly bred by a team of Toyota and Tesla engineers. Up to now, the thinking in Toyota city was that plug-ins are city-mobiles at best, for people who don’t stray too far from the charger. They may want to find out whether the concept can be taken a bit farther. Or further.

Moral for car dealers: Never turn down the request for a test drive.

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41 Comments on “The Truth About Toyota And Tesla...”

  • avatar
    Billy Bobb 2

    Disgusting. When Greenpeace comes out against electric cars it’s over.

    Better employ the NUMMI UAW thugs…or else!

    • 0 avatar
      Acc azda atch

      If they haven’t ALREADY signed their soul away to BP…

    • 0 avatar
      Acc azda atch

      If they haven’t ALREADY signed their soul away to BP…
      As others have done.

      — Nature Conservancy

      — Conservation International

      — Environmental Defense Fund

      — Sierra Club

      — Audubon

  • avatar
    Steven Lang

    Time will tell whether a Toyota/Tesla combination will work. But I have absolutely no doubt that hybrids and electric cars are going to take center stage within about five years time.

    The economics of it work. The challenge is to make the technology fast and durable. Tesla has been heavily focused on the former. Toyota pretty much offers the gold standard when it comes to the longevity of hybrids.

    Will Scion be dropped? Will Tesla become Toyota’s ‘sports car’ division with a hybrid bent? I doubt it. But there is something to be said for having a big brother with an arsenal of R&D and cash reserves.

    Toyota may not be able to come out of it’s shell of dullness and androgyny without the help that comes with a better brand. Tesla may just very well become Toyota’s answer to a market they simply can’t tap.

    But is there a real market? Does it have enough of an audience to be profitable? Will Tesla become an American-based Porsche or perhaps Toyota’s linchpin for dominating the hybrid and electric markets? Time will tell.

    • 0 avatar


      Big fan.

      But what’s with the strong faith in electric cars being center stage in 5 years?
      Heck, car roll-outs take that long and gas engines in five years are pretty much a done deal.
      The development cycle simply is a bit more complex and change like this wouldn’t be possible even un World War conditions.
      The pipeline is filled and I can’t see anything possible with your prediction.

      Maybe hybrid will be more commonplace, but even they have to justify their cost to the average consumer.
      Why buy the Escape hybrid if it takes 20 years to pay off the extra cost.

      This seems a little weird to suggest mom and pop USA are going to change as you believe.

    • 0 avatar

      “Why buy the Escape hybrid if it takes 20 years to pay off the extra cost.”

      Will gas price stay the same for 20 years? With Obama printing 3 trillion extra paper money per year, it’s not a stretch to see gas at $5 per gallon in 5 years and $10 in 10 years.

    • 0 avatar

      Hey wsn, the US Treasury has been printing money and running up debt since the early 80s, the current officeholder is just following in the footsteps of his predecessor, so best to keep the names/political parties/etc out of the discussion.

    • 0 avatar

      Well, not at the rate that our current administration is doing/will do.

      But that aside, printing more money will make prit’ near EVERYTHING more expensive, not just gasoline, so I don’t think that will really affect the “payback” math…

    • 0 avatar

      Hey wsn, the US Treasury has been printing money and running up debt since the early 80s, the current officeholder is just following in the footsteps of his predecessor, so best to keep the names/political parties/etc out of the discussion.

      Obama is doing unprecedentedly well that he printed more in two years than all the previous 20 years combined.

      Gasoline price will also do unprecedentedly well.

    • 0 avatar

      But that aside, printing more money will make prit’ near EVERYTHING more expensive, not just gasoline, so I don’t think that will really affect the “payback” math…

      Please explain your logic.

      Say, year 2015, gas at $5. Yes everything is expensive. Milk at $X and bread at $Y.

      Why won’t that make the purchase of a hybrid/electric car not a good payback?

    • 0 avatar
      Steven Lang

      Thanks TrailerTrash (and Company)

      I don’t do a lot of prognosticating when it comes to these things. Oil may go under $50 or over $200. I honestly don’t know.

      What I do believe is that hybrid and electric vehicles have the capacity to change the economics of the car ownership experience.

      As most everyone here knows (and a few don’t care to admit) hybrids already cost less to own than a conventional ICE equivalent IF you are among those that buy new and keep for long periods of time. The majority of new car buyers the world over fall into this category… and most of these buyers want a ‘cheap’ ownership experience. Hybrids are already better at doing that in most cases.

      Most of the larger markets are also going to see a lot more of them on the road because the availability of hybrid models in general (and styles dedicated to those models) is going to increase dramatically. I’ll give you a quick analogy,

      Right now everyone looks at the Prius as the ‘Model T’ of hybrids. When ‘hyrbid’ comes to mind… the Prius is most folks think about. However the opportunity for consumers to have one at ‘every purse and purpose’ within the next few years will likely lead to far more sales than is currently the case. I wouldn’t be surprised at all if China alone sells more hybrids in their own country in five years than what’s sold annually throughout the entire world today.

      The Better Place project and Nissan Leaf are pretty much going to face the same headwinds as hybrids first experienced… unless the cost of oil goes up dramatically. I don’t think the economics of these projects will work on a short term global level. In fact, they may never work period.

      But then again we have the unpredictable nature of events to consider.

      Recent wars have resulted in massive levels of ‘economic loss’ and a disproportionate number of these collective slaughters have been encouraged by a few tin-pot dictatorships, neo-conservatives, the Russian mafia, and a very wide pool of degenerate hateful shitbags the world over. For the most part, certain governments and religious fanatics seem bent on making life difficult for the rest of us.

      I can see a point where people buy a hybrid or electric vehicle because oil becomes artificially scarce. Then again, somebody out there may decide to blow up a few things and that would result in some truly nasty economics to consider. Not that I’m a fatalist when it comes to the human race. But human stupidity is unique in it’s destructive qualities.

      As for the current dreams du jour…

      You can buy a Nissan Leaf at this point for around $22k to $27k (depending on whether you live in CA/GA or somewhere else in the USA).

      Fuel economy averages about 150 mpg. IF Nissan will provide some type of strong warranty for 150,000 miles the savings would likely be in the vicinity of the $15k range (6,000 gallons at 25 mpg vs. 1,000 gallon equivalent at 150 mpg). That’s of course a very big ‘IF’ as in whose bailout money is used.

      Then you have the Better Place project that may be nothing more than a ‘pipe dream’… from wiki…

      Countries already signed up to this electric vehicle network include Portugal, the UK, New Zealand, Australia, Israel, Ireland, France, China, Singapore, Switzerland, Canada (British Columbia) and Monaco.

      There are also a long list of small affluent countries that would obviously like to have a hand in it if the idea actually works.

      Will it come true? I really don’t know. It strikes me as the usual vaporware but I can see a highly negative event or two like the ones mentioned above giving this some serious legs.

      Overall I would rate the chances of electric vehicles taking center stage as ‘remote’. Given the turbulence that’s out there I consider ‘remote’ a 50/50 chance.

  • avatar

    “Up to now, the thinking in Toyota city was that plug-ins are city-mobiles at best, for people who don’t stray too far from the charger. They may want to find out whether the concept can be taken a bit farther. Or further.”

    Like the Chevy Volt?

  • avatar
    John Horner

    As a venture play for Toyota this makes sense. Tesla, however, is the big winner here for the moment.

  • avatar

    People don’t buy Teslas to save money. A lot of people purchase cars that are more expensive, and offer fairly intangible benefits. People regularly buy cars with larger-engine options that, at initial purchase and over time, cost more than the cheaper-engine option, just to get a little more performance.

    If electric cars offer benefits that justify an additional cost, some people will buy them, and the view of electrics existing only to save money (and thus failing if they cost more) is a red herring.

  • avatar

    Gas may go up, but so will electricity, especially if we don’t build nuke plants or reduce coal and NG usage. If gas is $10/gal and the average home electric bill is $500/month, plugging won’t be too appealing either. Electrics will have to be almost the same to operate as gas for wide acceptance. That is 3-5 minutes to fill-up/charge (a huge issue with batteries – maybe supercaps can be used in tandem). Also 300-400 mile range at highway speeds, also a huge hurdle. Gas just packs a lot of energy into an easily transportable package. Batteries can’t touch that for the scale of the vehicles we need, and that get heavier all the time due to safety regs.

    But if Musk can unload Tesla onto Toyota, than he is smarter than I thought he is. Brilliant!

  • avatar

    It does my soul good to see 1) The boss of a big car company REALLY loves cars and driving; 2) A big car company buying a small car company because it is impressed by the product.

    It is heartening to see this deal go forward without hearing the words “synergy” “economies” “leveraging our strengths” or other MBA drivel. (Or “merger of equals”, for that matter.)

    If Toyota’s design and engineering philosophies start to mirror those of the boss, this looks to me like the beginnings of a really good thing at Toyota.

  • avatar

    The truth is Tesla has gotten $465M from the government, Toyota is able to make a paltry investment of $50M and sell part of NUMMI for an undisclosed price.

    Tesla gets advanced battery technology from the JV with Toyota-Panasonic (the most expensive component of an EV), plus they get economies of scale by sharing platforms with a Toyota or Lexus model (the only economically viable way to make a low-volume bespoke vehicle these days). Not to mention access to lithium and rare earth metal supplies that Toyota Tsusho is spending billions for.

    Toyota gets to invest in EVs with minimal risk exposure from a company that is using tax-payer money. It also gets the bragging rights of saving NUMMI and investing in the ‘American Dream’ (Tesla), something that GM couldn’t, or hasn’t, done.

    Its a win-win for both parties.

    It would be also a huge with for both Tesla and Toyota, if Tesla could gain access to Toyota’s dealer network; either select Lexus or Toyota dealers. Tesla gets an established outlet to sell and service their vehicles, and Toyota gets something exciting on their dealer’s lots for a change.

    • 0 avatar

      best freaking analysis of the deal I have read since the news broke yesterday. Originally, I thought that Tesla was basically saved by Toyota in the same way that Palm was saved by HP a couple of weeks ago but I can clearly see the potential win for Tesla. One thing to add is the fact that Toyota is more likely to bring in its organizational prowess and improve Tesla’s management tactics b/c, so far, this part has been a failure (on top of Tesla’s balance sheet). I would expect top-tier management changes withing weeks.

  • avatar

    I used to live in Fremont, and I drove past the NUMMI plant during my daily commute. It’s an O.K. suburban area, and the plant has excellent freeway and rail access, and it’s huge, and the property isn’t fully built out, andandand…

    …And in my old neighborhood, a cheapcheapcheap 1000 square-foot, three-bedroom, one-bath house built on a slab with a flat tar&gravel roof goes for about $400K USDollars. The nice houses cost more.

    The price of local real estate is driven by the wages of the high-tech industry in the Silicon Valley to the south. Intel, AMD, Cisco, Hewlett Packard, Sun/Oracle, Apple, and Google (and many more!) are all headquartered less than thirty minutes away. None of these tech giants do any kind of production anywhere near the Silicon Valley. Wages are too high.

    This link shows a nearby home. This home is adjacent to the railroad tracks. I, personally, would not buy this home because trains are noisy. Note the estimated price:,-fremont-ca_rb/

    According to Google Maps, that home is 1.6 miles from the new Toyetsla (Teslota? Tesyota?) plant. To give you a better idea of the proximity of these things, here’s a Google Map that shows the route from the above home, to the new Tesyolta plant, to the headquarters of Intel:,+fremont+ca&daddr=45500+Fremont+Boulevard,+Fremont,+CA+94538-6326+(Nummi)+to:2200+Mission+College+Boulevard,+Santa+Clara,+CA+95054-1549+(Intel+Corporation)&hl=en&geocode=Ffx6PAIdDze7-CnvC063IMePgDHnlge5xhJsag%3BFbIiPAIdbDe7-CE3_WuGeZXLRCnPdJMOAMePgDF0fyzaO55ufw%3BCdLZMm-owEq2FYOAOgIdgfy6-CFnMNdTYEzJWylrp5mFkcmPgDG3sKJAyneYhw&mra=pe&mrcr=1&sll=37.453,-121.965171&sspn=0.220218,0.369415&ie=UTF8&z=11

    I love the idea of building Teslas in the old GM/Toyota/NUMMI plant, and I sincerely hope the venture is a success. (However, I’m not personally inclined to buy any electric car until they’re available used and cheap.) But it seems foolhardy IMHO to build cars (or anything) in such a high-cost area.

    FWIW, somebody on the radio this morning predicted that Tesy-, um, the new venture, will need a workforce about one-fifth the size of the just-folded GM+Toyota NUMMI venture. No word yet on the unionization status of that not-yet-hired workforce. NUMMI (and GM before it) were fully unionized.

    We need a snarky name for this venture. Teslota sounds too much like something you’d order at Starbucks. Suggestions?

  • avatar

    I know it’s a bit off-topic but I have often wondered if anyone has done the arithmetic around an electric RV. I mean a 30 foot Class A type of RV. These things only get around 8 or 9 mpg which puts people off but they are based on 10 ton trucks and could easily carry a boat load of batteries. They typically travel less than 100 miles a day betwen RV parks, if that. They already spend most of the day plugged into an AC source just to run the fridge and TV. Is it feasible? Anybody have any thoughts?

  • avatar

    The cynical interpretation is that this was an incredibly cheap way for Toyota to start burnishing its image again, both by jumping into EVs with the only company that actually has managed to put one on the road, and by getting those hysterical about NUMMI off its back. Toyota may be persona non grata in Washington, but in one fell swoop they bought a lot of love in their home state. Let’s see who lines up with the publicity-grubbing Orange County prosecutor now. Add to that the possibility that Toyota and Tesla might actually build some decent cars, and this could be a really big deal.

  • avatar

    Gas may go up, but so will electricity, especially if we don’t build nuke plants or reduce coal and NG usage. If gas is $10/gal and the average home electric bill is $500/month, plugging won’t be too appealing either

    If gas goes up everything will.
    Toyota is betting a long shot, as T has so much money a small plant is a drop in the bucket, 1) is to tell Uncle Sam they’re invested more mulla in Lala land, good PR for the co.
    Should the car sells he gets a lot of return in both tangible & intangible.

    Never turn down a test drive, if u want to sell cars.

  • avatar

    We underpants gnomes know everything about big corporations!

    Step 1: Collect world’s underpants

    Step 2:

    Step 3: Profit

    Get it?

  • avatar

    Fifty Mil? Toyota blew nearly that much on Ralph Schumacher’s salary back when they had a Formula One team. I think this is just a move to get some Green street cred and polish their image with the colossal dimwits that run California and sit in the seats of power in Washington DC, whilst avoiding more bad PR with a plant closure. I’m sure that Toyota could build an electric Lotus Elise on their own, and probably better than Tesla. When Tesla inevitably fails they’ll be able to close the plant and point fingers elsewhere, or should they have the need they can re tool there and build something useful.

    • 0 avatar

      That’s exactly what this is… and it’s a brilliant move on Toyota’s part, for a relative pittance.

      As for polishing its image “with the colossal dimwits that run California and sit in the seats of power in Washington DC” I again give Toyota credit for recognizing its audience, and pandering to them appropriately.

  • avatar

    What’s this about the Nummi plant in Fremont? Tesla had earlier judged it much too big for their operation. Besides, it was an old GM plant and was let go (to old GM) in the bankruptcy. It’s now owned by the creditors GM shed in the bankruptcy, not Toyota, and the last I heard it’s up for sale. Nummi and the physical plant in Fremont are two different entities. Unless I’m mistaken. Does anyone have better info?

  • avatar

    Toyota needs Tesla like they need a hole in the head. Jury-rigging an EV out of laptop batteries is a stunt that won’t be repeated by an ostensibly profit-seeking company any time soon. Toyota puts 250K+ electric motors and batteries into cars each year without Tesla’s help and has access to good battery technology with their JV partners.

    It must be a payoff for buying NUMMI.

    Of course, one admires Toyota for this, just as one admires GM for the way they left Toyota holding the bag in the first place.

  • avatar

    You mean “jerry-rigging”, and the work done by AC Propulsion (adopted by Tesla) doesn’t qualify for that description.

    • 0 avatar

      AC Propulsion and Tesla did a job with the tools at hand. However, vehicle batteries from now on will be purpose-built for the task as entire packs with the battery manufacturers as partners. Toyota already does this in NiMH and will be doing so, very soon, in Li-Ion, as does Nissan. Tesla’s well on its way to footnotedom.

  • avatar

    Can’t help yourself can you Bertel?

  • avatar

    Looks like Tesla will simply be producing Prius’s in the future. This is a good way to merge Tesla out of the unprofitable electric car business and become part of Toyota in the process. How long could Tesla survive producing a few hundred vehicles a year.

  • avatar

    Toyota sells 1.8 liter engines to Lotus for the Elise -> Lotus sells Elise bodies to Tesla -> Tesla sells some of itself to Toyota, and the circle is complete.

  • avatar

    Wow, Elon Musk is a terrible public speaker. I’ve heard less stammering and filler in high school history classes.

    It’s pretty sad when a Japanese man speaking his second language can still speak better than you.

  • avatar
    Telegraph Road

    This is a win-win for both parties.

  • avatar

    In my opinion, this is just a weekend hobby for Akio Toyoda. It costs him about the same to buy this, as it does for the average person to buy a small remote control vehicle to play around with.

    The Tesla, or any other electric car, has no short to medium term future. There are still electric car plug in stations dotting the California roadways, and have been there for 15-20 years. How often have you ever seen one being utilized?

    Once the greenies figure out that charging a battery car with a coal fired electrical plant isnt “green”, the battle will be over. Not to mention the fact that there isnt enough of those electrical plants around to handle the extra demand.

  • avatar

    Time for another Tesla Death Watch entry?

  • avatar
    Stu Sidoti

    These Tesla fellers must be some slick salesmen. Their in bed with Ford, Daimler and now Toyota. Amazing.

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