Confirmed: Tesla to Build Electric Vehicles with Toyota at NUMMI Plant

Tesla Motors and Toyota logos

Tesla Motors and Toyota logos

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Governor Arnold Scharzenegger leaked earlier today that Tesla Motors will be partnering with Toyota to build a new electric vehicle. Now, a reliable source close to the deal confirms that this is true — but that Tesla will also be acquiring the recently-closed NUMMI automotive manufacturing plant in Fremont, Calif., potentially bringing back thousands of jobs lost when that facility closed last month.The company’s deal with Toyota has three facets:

1. The joint development  of a brand new,sub- $30,000 electric car, that will contain Tesla’s unique powertrain design, with everything else built by Toyota;
2. The purchase of the NUMMI plant, where Tesla plans to manufacture both its Model S sedan due out in 2012, a new $30,000 Tesla-designed vehicle, and the more affordable jointly designed “third-generation” vehicle;
3. A $50 million investment from Toyota into Tesla when the company goes public, probably later this year.

There’s several pieces of huge news here. Let’s dissect each one of these points:

1. The new car: Tesla clearly realized that the Roadster and Model S weren’t going to cut it — not in a market where the Chevy Volt and Nissan Leaf are going to dominate at a lower price. Tesla would need its own sub-$30,000 car (which would sell for considerably less after likely rebates), in order to survive. But it couldn’t get its costs down on its own, so partnering with a major automaker seemed to be the best course of action. Toyota, which has had a decade’s headstart as the green car leader since the release of its hybrid Prius, was probably also shopping around for a bold, new play in the space to retain its throne.

The design of the car, which probably won’t be released today, will draw largely from an existing Toyota design, our source says.

2. NUMMI: The plant, located in the Fremont, Calif., laid off 4,700 employees (and about as many outside contractors) when it closed its doors on April 1. Our inside source says that when Tesla gets the plant up to speed again, in four to five years — when it plans to launch its car with Toyota — the facility should be employing even more people than it did previously.

At top production levels, the plant could build upwards of half a million vehicles every year. Only a small percentage of these will be Model S units. The as-yet-nameless third-generation vehicle, a high-volume car, would make up the bulk of the inventory, along with the joint Toyota-Tesla design. That’s far from a certainty — the plan still depends on the company’s ability to raise enough capital and scale fast enough to make this third car possible.

There’s no word on the price Tesla is paying for the plant, although the source said the company “got a great price” and that it “otherwise wouldn’t have been able to afford it.” We’ll be looking for this figure in the company’s revised S-1 filing due out next week.

We do know, from our source, that Tesla will be using much of its $465 million loan from the U.S. Department of Energy to make the buy. This means that NUMMI is the site that Tesla has been shopping around for since last year — not one in Downey, Calif., in the Los Angeles area, which was the leading contender.

3. The $50 million: Toyota will be joining Daimler in owning a stake of Tesla after it goes public — a sale that is expected to take place in the third quarter of this year, but there are no guarantees. While the original S-1 pegged the amount expected to be raised in the IPO at $100 million, our source predicted it will probably exceed that amount.

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Comments (5)
  1. I'm from Missouri about all things Tesla. Even so, if they can actually scale up and employ as many people as were there before the shut down, it will be an awesome achievement. And at least an American company would be a major partner, and the cars would be produced here. Beats the h**l out of BYD, IMHO.

  2. Can someone smarter than I am explain how this will or won't affect's Tesla's status as an independent player. I really don't trust the majors to carry through on their commitments to electric cars, and this doesn't sound like good news to me.

  3. @Steve Bruns,
    I'm not too smart but I know that a 50million investment will not buy Toyota a lot of control. If Tesla is valuated at 1.2B, 50m gives them ~4%. Even if they have a preferential predefined price, it's unlikely that they would get anything beyond 10%.
    So Tesla gets to prep its IPO, Toyota gets some green creds and consumers get to know that Tesla will have experienced partners to learn from.

  4. Some of the employment numbers don't add up. I saw another press release that said they would start-up 1,000 employees and make 20,000 cars per year for the first few years. That is 20 employess per car out the door. NUMMI had 4,700 employees cranking out over 400,000 cars per year or about 8.5 employees per car. I suspect they got a little government help to purchase or lease the plant at low cost based on rosy employment numbers. Downey CA is upset because Tesla left them at the alter. Downey should count their blessings as Big Business (Toyota/Tesla) probably just screwed the tax payers of Fremont, CA and surrounding county.

  5. Forbes sites political and PR motives for Toyota's move.It needs the green points to be able to keep selling in California (if most of the $30K car's components are sourced from Toyota this will include the badges I suppose) and to get out of the doghouse in Washington. Also it doesn't need the closure of the NUMMI plant on top of the PR ordeal it's already going through:

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