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Tesla and Toyota Intend to Work Jointly on EV Development, TMC to Take Equity Stake in Tesla; Tesla Purchases NUMMI Factory

Tesla Motors, Inc. and Toyota Motor Corporation (TMC) 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.

Tesla also has purchased the former NUMMI factory in Fremont, California, where it will build the Model S sedan (earlier post) and future Tesla vehicles. As recently as April of 2010, the NUMMI factory was used by Toyota to produce the Corolla and Tacoma vehicles using the Toyota production system.

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.

—TMC President Akio Toyoda

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. We look forward to learning and benefiting from Toyota’s legendary engineering, manufacturing, and production expertise.

—Tesla CEO and cofounder Elon Musk

In May 2009, Daimler AG acquired an equity stake of nearly 10% in Tesla. The two companies had already been working closely to integrate Tesla’s lithium-ion battery packs and charging electronics into the first 1,000 units of Daimler’s electric smart car. That investment was to deepen the relationship between the two, and enable the partners to collaborate even more closely on the development of battery systems, electric drive systems and in individual vehicle projects. (Earlier post.)

NUMMI. The NUMMI plant is capable of producing half a million vehicles per year or approximately 1% of total worldwide car production. The Model S, which will be built there, is designed from the ground up to take full advantage of the electric vehicle architecture. The sedan, which Tesla unveiled in March 2009, has an anticipated base price of $49,900, including a federal tax credit. With an optional extended-range battery pack, the Model S will travel over 300 miles per charge.

The factory is located in the city of Fremont near Northern California’s Silicon Valley, very near Tesla’s Palo Alto headquarters. The short distance ensures a tight feedback loop between engineering, manufacturing and other divisions within the company, as well as easy access to the Silicon Valley engineering population.

The Tesla Factory effectively leverages an ideal combination of hardcore Silicon Valley engineering talent, traditional automotive engineering talent and the proven Toyota production system. The new Tesla Factory will give us plenty of room to grow.

—Tesla CEO Elon Musk

Toyota produced its last car there just last month. Tesla began discussions to acquire the site this spring, when it was also evaluating opportunities in Downey and Long Beach. The turnkey nature of the facility with its recent production of top quality vehicles and its considerable room for expansion made it stand out from other sites, according to the company.

Comments

Account Deleted

At the 2010 Detroit auto show Elon Musk made jokes about Fisker buying a plant that was way too big for that company and then what happens. I didn’t see this coming but hopefully Tesla will not break their neck on it but instead be able to get into volume production much sooner than if they didn’t do this. Somehow they must have made a very good deal with Toyota or Tesla would not be able to afford a half a million unit per year facility at an attractive spot in California. Toyota seems to be very much behind in EVs (behind Nissan, Renault, Mitsubishi, GM) but their cooperation with Tesla could accelerate their own effort to bring well designed Toyota EVs to the market. Elsewhere I read that both Toyota and Tesla will produce EVs at this facility and that Tesla will rent factory space to its suppliers at the facility. For instance, I would not be surprised to see Panasonic setting up a cell manufacturing line at the NUMMI facility that will supply Tesla and Toyota with battery cells. It could save costs if the end of the cell fabrication line would be the beginning of the battery pack fabrication line and finished packs was swapped into new cars using an ordinary battery swapping station at the end of the car assembling line. In any case a facility that large dedicated for EV production could mean that Nissan/Renault will get some real competition in terms of volume fabrication before they expected it. In any case it is exiting news and just another confirmation that EVs are going to be much bigger much sooner than originally anticipated.

Matthew

If I were trying to build a product whose biggest challenge was cost, I certainly wouldn't do it in California of all places. I wouldn't be surprised to learn that they were practically given the factory, and that's why the financials are working out.

HarveyD

Toyota's deep pockets and knowhow + link with Panasonic for world class batteries could be a major boost for Tesla or a future take over by a new JV to produce electrified vehicles for USA. It would certainly be a good way to make use of the existing California Toyota facilities. California is an ideal market for e-vehicles.

dahcredyns

$50 million? That's basically pocket change when it comes to this kind of development and seems largely irrelevant in terms of resulting in something meaningful.

This is more about PR than a serious potential increase in EVs from Toyota.

Certainly, the news could be worse, and there is a little hope to be gleaned from this partnership, but Toyota is more focused on upgrading their image in light of further Congressional attacks. Likewise, California is a huge market for Toyota's hybrids and their rep has taken a hit in that state for abandoning NUMMI.

sulleny

With Toyota behind Tesla and the Model S - they will have the next Camry. A win for us EV enthusiasts and a PR savior for Toyota.

No wonder Justine (Musk's ex) wants 10% of Elon's stock.

SJC

That facility is big enough to build batteries, controllers, motors and cars under one roof. This will be a good P.R. move for Toyota. They show that they are not abandoning the area but helping to build green cars.

the doctor

It will be interesting to see if Elon tries to run this as a non-union factory, especially considering how the UAW castigated Toyota for bowing out after GM pulled the ripcord ( and they let GM off scot free). If he tries as a union factory, he will sell out within a year rather than deal with the UAW. Downey would have been less hassle.

HarveyD

Can UAW and successful local car industries ever co-exist?

SJC

It depends on the price premium and market response. Will they buy this at $50,000 versus $40,000 for a Volt or $30,000 for a Leaf? Would you buy American made tennis shoes for $100 per pair or Viet Nam made Nikes at $100 per pair or Chinese copies for $50 per pair...the customers decide.

sulleny

SJC,

experience demonstrates the copies fall apart in less than a year. Quality of low cost goods has sunk to new depths.

SJC

The market shows that they will buy the $100 Nikes made in Viet Nam for $10 because of the brand.

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