Tesla Inc (TSLA)

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Tesla CEO Elon Musk says we’ll see a Tesla-powered Toyota on the road before the Model S, which he keeps saying will arrive in early 2012


Everyone wins in the Toyota-Tesla partnership, but not for the reasons most people think.

The Japanese giant and the Silicon Valley upstart stunned everyone with Thursday’s announcement that they’ll work together on electric vehicles and components. Toyota will buy $50 million worth of stock when Tesla Motors goes public, and it gets a closer look at proven EV tech. Tesla gets a shuttered Toyota factory in Northern California to build the Model S sedan and expert advice on how to engineer and build a mass-market car.

But the biggest thing this deal does for all involved is burnish their images. Toyota reaps a PR bonanza by resurrecting a factory is shuttered last month and investing in green tech. Tesla increases its credibility as it prepares to go public. Having the world’s largest automaker in your corner builds a lot of buzz and goes a long way toward assuring potential investors you’ll deliver on your promises.


The conventional wisdom says Toyota is shaken by the Nissan Leaf and, having bet the farm on hybrids, wants to develop an EV quickly. There’s some validity to that, but the best thing Toyota gets from this deal is great public relations. In addition to seemingly never-ending recalls, Toyota took a lot of heat for closing the New United Motor Manufacturing Inc. factory in Fremont, California. Now it’s handing the place over to Tesla and getting credit from the likes of Gov. Arnold Schwarzenegger for helping create green jobs.

“This almost makes them heroes because they found a solution for NUMMI,” says Mike Omotoso, an industry analyst with J.D. Power and Associates.

Both companies say they’ll work together to develop electric vehicles. No one’s offering specifics, but Tesla CEO Elon Musk says we’ll see a Tesla-powered Toyota on the road before the Model S, which he keeps saying will arrive in early 2012. That jibes with industry speculation that Toyota went to Tesla so it could quickly catch up with Nissan, GM and Mitsubishi.

But to suggest Tesla is Toyota’s salvation oversimplifies things. If Toyota decides to jump into the EV market, it has the skills to do so. It dominates the hybrid market, it is developing a plug-in Prius, and it has built electric concepts — most recently the FT-EV concept. It knows electrification.

“Toyota has over 10 years’ experience with hybrids and so it knows motors, controllers and batteries,” Omotoso says. “There’s definitely a lot of know-how in those areas.”

Toyota also has a joint venture with Panasonic to build batteries. Granted, it is using nickel–metal hydride, but the plug-in Prius will use lithium-ion. If Toyota wants to develop an EV quickly, it might put Tesla drivetrains in something like the FT-EV so it can get a program rolling — that’s exactly what Daimler did with the Smart EV. But it’s hard to see Toyota relying on Tesla over the long haul. We’re more likely to see parts making their way from Toyota to Tesla.

“The Model S is going to be ours. We’re building it from the ground up,” says Tesla spokesman Ricardo Reyes.

Yet it’s a safe bet the S will share components with Toyota or Lexus models. There’s no need for Tesla to source, say, its own brake components or HVAC system when it can raid the Toyota parts bin. Doing so will allow Tesla to tap Toyota’s supply chain, increasing its economies of scale and bringing down the cost of the S, which it says will cost $49,900 after the $7,500 federal EV tax credit.

Reyes concedes “the Toyota deal opens up some possibilities” for sharing parts and cutting costs, but says it is too early to speculate on if or when that might happen.

Aaron Bragman, an industry analyst with IHS Global Insight, goes one step further and says the S probably will ride on a Toyota platform, meaning it will share engineering and major components with a current model like the Lexus IS. Omotoso isn’t so sure, noting that Tesla already has done a lot of engineering for the S, and using a Toyota platform might require going back to the drawing board. Of course, we’ve heard this song before — there was speculation last year that the S would use Mercedes parts, if not a platform, after Daimler bought a stake in Tesla.

Whatever the case, the Model S will be built in the former NUMMI factory. The huge plant — a joint venture Toyota and GM launched in 1984 — produced 400,000 cars in 2006. Tesla’s talking about building no more than 20,000 Model S sedans to start (though Musk, as ambitious as ever, promises more models will be coming), so it will occupy a small corner of the factory for now.

“It’s an investment in the future,” Reyes says. “It’s got room for us to grow.”

Reyes says Tesla was drawn to the factory because it’s near Tesla headquarters in Palo Alto and it’s a “turnkey” operation. Toyota shut it down in April, and although the automaker took most of the equipment with it, the fact that it’s an automotive factory will minimize the time Tesla needs to spend prepping it.

“It has everything they’ll need to build cars,” Bragman says.

Another reason NUMMI works well for Tesla: VP of manufacturing Gilbert Passin came to Tesla last year from from Toyota where, among other things, he ran NUMMI.

No word on when Tesla plans to move into the factory, but it has no time to lose if it is to meet its goal of delivering the S by early 2012.



Read More http://www.wired.com/autopia/2010/05/toyota-tesla-deal/#ixzz0uQ2PU8hb


Read More http://www.wired.com/autopia/2010/05/toyota-tesla-deal/#ixzz0uQ2En5UT