Toyota To Buy $50m Stake In Tesla, Tesla To Buy NUMMI, Joint EV Planned
Akio Toyoda has often warned his company of the risks of “big company syndrome,” doubtless with the GM’s spectacular decades-long fall from dominance in mind. Today, he framed Toyota’s announcement of a partnership with EV startup Tesla as way to reconnect with a lost underdog mentality, saying
By partnering with Tesla, my hope is that all Toyota employees will recall that venture business spirit
Of course, he also said that only a recent return to profitability allowed Toyota to even consider this deal in the first place. And what of the deal? Toyota will buy $50m worth of Tesla shares “in a private placement to close immediately subsequent to the closing of Tesla’s currently planned initial public offering,” as a Tesla presser puts it. In exchange, Tesla is buying “site two” of the NUMMI plant for what Tesla CEO Elon Musk terms “a great price.” NUMMI will be the production site for Tesla’s Model S, a $30k Tesla, and a jointly-developed sub-$30k vehicle. The two firms also intend to cooperate on the development of EV components as well as production system and engineering support
Tesla and Musk are clearly playing their forward-looking statements close to the chest, so details are still sketchy about vehicles that haven’t already been announced. According to VentureBeat, a $30k Tesla would come first, with the Toyota-based, Tesla-powered vehicle being termed “third generation.” That vehicle is reportedly looking at a four to five year timeline to start of production, provided everything else pans out in Tesla’s favor. When those cars come off the line, there’s talk of volume exceeding previous NUMMI levels (capacity is half a million units) and generating 10,000 jobs (including suppliers).
For now though, Tesla is committing to spending “a couple of hundred million” preparing “a little corner” of the NUMMI site, and hiring 1,00 workers for production there, presumably to build the Model S which is now scheduled for a 2012 launch. The Model S will only account for 20k units of production, at least until planned platform variants (think crossover) hit the lines. Speaking of which, what is the status of that allegedly unique, Tesla-developed platform, anyway?
This means the whole gambit comes down to the joint vehicle, without which Tesla would probably never have generated enough volume to survive with Nissan Leafs and Chevy Volts hitting dealerships this year. But will these “Toyeslas” be sold and/or serviced at Toyota dealerships? And just how “based on a Toyota design” are these things going to be, anyway? If the answers to those questions are “yes” and “obviously,” Toyota just bought itself another brand in the name of not following in GM’s tragic footsteps (unless it plans on selling the joint vehicle as a Toyota). And if the answers are “no” and “reasonably,” then Tesla has four to five years to prepare for the brutal realities of the mass market. Either way, there are a million questions to be answered.
Meanwhile, Daimler has already given Tesla the same $50m for a ten percent stake in Tesla, and the two jointly developed an EV Smart. Daimler has already sold part of that share to Aabar Investments of Abu Dhabi, and with nothing mission critical at stake, it seems likely to not pursue further ties with Tesla. Not that Toyota probably cares. It’s now in the news for something other than sticky pedals, and a $50m investment in the American dream is worth more at a time like this than twice that amount in advertising. Besides, what’s the worst case scenario? Toyota’s lost a NUMMI partner before… it probably knows what it’s getting into.
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Everybody was wondering why Tesla wasn't pushing out the date of the Model S release, without even a shovel mark at the proposed plant site - I guess this is the answer. I wonder if this deal has been in the works for a while....
TTAC has always sold Tesla short IMHO. The thing that Tesla has always had that its competitors haven't had is a cadre of supporters on every level, true believers who are willing to put their money on the line to keep the company going. Now we can add Mr. Toyoda to that list. To the extent Tesla has been more successful than would-be competitors, it isn't due to breakthrough technology, it's due to marketing reasoned engineering choices, and to a certain degree marketing choices. Elon Musk has his faults, but almost everyone concedes he's a very intelligent man. When he sees a flaw in the business plan that shows Tesla needs money or technical support, he goes out and gets the money or technical support. I'm imagining an adventurous Tesla design for a mainstream electric car, with the manufacture of the car being contracted out to Toyota. Toyota engineers would figure out how to manufacture the car efficiently and profitably. This has a very good chance at success.