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Does Tesla's Toyota Deal Change Everything For Electric Cars?

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2009 Tesla Roadster, Skyline Boulevard, San Mateo, CA

2009 Tesla Roadster, Skyline Boulevard, San Mateo, CA

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The surprise partnership between Tesla Motors and Toyota announced two weeks ago generated a lot of head-scratching. The big question is, What does Toyota get out of the deal?

It's easy to see what Tesla gets:

  • more capital (Toyota will invest $50 million in Tesla just before its planned public offering);
  • a nearby auto factory (NUMMI in Fremont, California) in which to build its 2012 Model S electric sports sedan;
  • access to Toyota's undeniably world-class production engineering; and
  • access to Toyota's array of global platforms, components, and supply chains

Tesla Motors and Toyota logos

Tesla Motors and Toyota logos

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2010 Toyota Prius

2010 Toyota Prius

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Tesla Model S Sedan

Tesla Model S Sedan

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prototype 2012 Toyota Prius Plug-In Hybrid, April 2010

prototype 2012 Toyota Prius Plug-In Hybrid, April 2010

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#WIN: Tesla

In other words: Tesla gets access (at least in theory) to many of the elements it desperately needs to become a volume carmaker.

But Toyota is known for developing technologies in-house, as it did with the Hybrid Synergy Drive system that cemented its position as the leader in hybrid-electric cars. And its only investments in existing car brands have been Asian (Subaru and Daihatsu, to name two).

So why'd Toyota do it? Here's our list of possibilities, some subjective handicapping, and the risks for each:

(1) BUZZ: It's positive PR to counter Nissan (likelihood: 40 percent)

The electric 2011 Nissan Leaf has been a smash success in the U.S. and Japan. The first year's production was completely spoken for just weeks after it went on sale. That must gall Toyota, which prides itself on technology leadership and sells far more cars than Nissan.

After waves of lousy PR during the sudden-acceleration crisis, including CEO Akio Toyoda being hauled in to testify before the U.S. Congress, Toyota desperately needs to point to something positive.

And if there's one thing Tesla has, it's positive buzz. Anyone who drives the all-electric 2010 Tesla Roadster comes away a convert. Plus CEO Elon Musk couldn't be more unlike the faceless, grey-suited salarymen who wield the true power.

THE RISK: Elon Musk's ego, and his tendency to say things that aren't necessarily quite true.

(2) SHAKEUP: CEO Toyoda wants to make a point (likelihood: 30 percent)

Purely because it's so un-Toyota, this deal got a lot of press. And the muttering and speculation has continued. Hey, you're reading this article, right?

Remember that CEO Toyoda is relatively new in his position. All new CEOs need to put their stamp on the companies they run, to make it clear they mean business.

This deal probably couldn't have been imagined by the folks who used to run the show. It clearly draws a line in the sand. It's a signal that, as they say, attention must be paid.

THE RISK: Nothing comes of it and Toyota quietly has sever its ties or, perhaps worse, Tesla fails--publicly and spectacularly.


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Comments (3)
  1. I like #5, Prestige. The fact that the HS bombed proves Toyota was more lucky than visionary with their hybrid development process. Toyota still doesn't understand the American car buyer's value system, so icing their Lexus cake with Tesla makes sense. And since Elon's wife is dumping him, he'll need the cash sooner rather than later.
     
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  2. Do they get the sticky gas pedal too?
     
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  3. The tone of this article is: Tesla Motors engineering hasn't proved anything and is a waste of time for Toyota. The ingenuity of Tesla engineering is outstanding and is one company who is bringing high horse power to the electric vehicle. I agree that Tesla Motors has not produced very large volumes yet; however, I wish you would give Tesla Motors more credit for what they have been able to accomplish.
     
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