By on May 20, 2010

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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15 Comments on “Toyota To Buy $50m Stake In Tesla, Tesla To Buy NUMMI, Joint EV Planned...”


  • avatar
    ClutchCarGo

    Wasn’t this the plot of The Producers? Sell 50% of a future product to dozens of investors, then produce a miserable failure that shows no profit so that you don’t owe the investors anything once you go broke? They’ve already got Daimler and Toyota, but there’s still VW and PSA…

  • avatar
    MadHungarian

    This could work really well, as long as Toyota resists the temptation to pull Tesla into the vortex and start producing badge engineered Yarises. Remember how GM killed Saturn.

  • avatar
    Robert Schwartz

    I guess it is penance for the SUA crisis, or maybe a chance to distract the rubes in Washington.

  • avatar

    Full text of Toyota release follows. In haste, B
    ——————————————————-

    Tesla Motors and Toyota Motor Corporation Intend to Work Jointly
    on EV Development, TMC to Invest in TeslaPalo Alto, California, U.S.A.—TESLA MOTORS, INC. (Tesla) and TOYOTA MOTOR CORPORATION (TMC) today announced that they intend to cooperate on the development of electric vehicles, parts, and production system and engineering support.

    The two companies intend to form a team of specialists to further those efforts. TMC has agreed to purchase $50 million of Tesla’s common stock issued in a private placement to close immediately subsequent to the closing of Tesla’s currently planned initial public offering.

    “I sensed the great potential of Tesla’s technology and was impressed by its dedication to monozukuri (Toyota’s approach to manufacturing),” said TMC President Akio Toyoda. “Through this partnership, by working together with a venture business such as Tesla, Toyota would like to learn from the challenging spirit, quick decision-making, and flexibility that Tesla has. Decades ago, Toyota was also born as a venture business. By partnering with Tesla, my hope is that all Toyota employees will recall that ‘venture business spirit,’ and take on the challenges of the future.”

    “Toyota is a company founded on innovation, quality, and commitment to sustainable mobility. It is an honor and a powerful endorsement of our technology that Toyota would choose to invest in and partner with Tesla,” said Tesla CEO and cofounder Elon Musk. “We look forward to learning and benefiting from Toyota’s legendary engineering, manufacturing, and production expertise.”

    TMC has, since its foundation in 1937, operated under the philosophy of “contributing to the society through the manufacture of automobiles,” and made cars that satisfy its many customers around the world. TMC introduced the first-generation Prius hybrid vehicle in 1997, and produced approximately 2.5 million hybrids in the twelve years since. Late last year, TMC started lease of Prius Plug-in Hybrids, which can be charged using an external power source such as a household electric outlet. The company also plans to introduce EVs into the market by 2012.

    Tesla’s goal is to produce increasingly affordable electric cars to mainstream buyers – relentlessly driving down the cost of EVs. Palo Alto, CA-based Tesla has delivered more than 1000 Roadsters to customers in North America, Europe and Asia. Tesla designs and manufactures EVs and EV powertrain components. It is currently the only automaker in the U.S. that builds and sells highway-capable EVs in serial production. The Tesla Roadster accelerates faster than most sports cars yet produces no emissions. Tesla service rangers make house calls to service Roadsters.

    END

  • avatar
    John Horner

    This is a huge win for Tesla.

  • avatar
    healthy skeptic

    Hard to see how this is anything but great new for Tesla. I admit I’d pretty much given up on them. However, I still think they’d be wise to stick to high-end cars like the Roaster and the Model S, and stay the hell away from Nissan Leaf territory. Downmarket is death for them. But they could carve out a pretty nice niche as a maker of prestigious high-end EVs.

    • 0 avatar
      mythicalprogrammer

      I actually thought the opposite. They need to sell to more people then the elite. Telsa roaster is a toy in comparison. I was beginning to think that they were going to tank but this move is really smart for them.

      Hopefully, Nissan will be fine. Telsa unit output number is very little and Carlos Ghosn noted this.

    • 0 avatar
      healthy skeptic

      If Tesla wen downmarket to compete with the Leaf, it’s not Nissan I’d be worried about, it’s Tesla.

  • avatar
    porschespeed

    Hokey smokes Bullwinkle!

    Desperate for positive PR, Toyota sucks up to a leading purveyor of vaporware – film at 11…

    50MM is chump change for Toyota, as such, to consider this anything more than a marketing ploy is naive in the most definitive sense of the word.

    While fully aware that many of the bleeding edge breakthroughs come from an unknown in a garage, I also am fully aware that Tesla is, at most generous, a joke. One that gets press and therefore has name recognition, but none the less, a joke if one performs even the most rudimentary of analysis on their financials.

  • avatar
    Tosh

    Toyota just wants to get their hands on the hot Model S to badge it as the Lexus HS replacement.

    • 0 avatar
      porschespeed

      Were Tesla to have any tech that was not available on the open market, to anybody with a decent budget, I’d buy that suggestion.

      But, the reality is that any dedicated hobbyist can outdo Tesla for the retail price of their electric Lotus.

      No one else bothers, because there is simply no money to be made from selling them – the profit is all in the hustle.

    • 0 avatar
      healthy skeptic

      >> But, the reality is that any dedicated hobbyist can outdo Tesla for the retail price of their electric Lotus.

      But, the reality is that 99.9999% of the car-buying public aren’t dedicated hobbyists and never will be.

    • 0 avatar
      porschespeed

      @healthy skeptic,

      Fair enough. The ‘average motorist’ does not have the level of interest and/or knowledge to best Tesla product.

      I would, however, proffer that it’s more like 99.9%. There’s really tens of thousands of people in the US that know at least as much as what Tesla sells as ‘cutting edge’.

      Whether or not they act on that knowledge is a deeper question that we could spend days discussing…

  • avatar
    shaker

    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….

  • avatar
    Conslaw

    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.

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