Having ignored the first wave of EV enthusiasm, Toyota turned to Tesla in the aftermath of its recall scandal as an investment that could potentially catch it up with other EV makers, and possibly help its battered image along the way. Officially, the deal was brokered after Toyota CEO Akio Toyoda drove the Tesla Roadster, and came away impressed with its “splendid flavor.” Toyota then dropped $50m on Tesla’s stock and another $60m on the Tesla-developed RAV4 EV prototype, raising the possibility of re-starting production at the NUMMI plant, which Tesla bought from Toyota as part of the hookup. But with Toyota also developing an EV city car in-house and talking up the return of hydrogen cars, Tesla’s role in Toyota’s future is clear as mud. If the RAV4 EV makes financial sense, Tesla could contract-build them at NUMMI, adding much-needed volume to a giant factory that would otherwise be building only the Model S (at a rate of about 20k per year). But there’s the rub: Tesla clearly needs Toyota more than the other way around; it needs Toyota’s volume, manufacturing expertise and legitimacy. But what will Toyota get out of the relationship? An expensive EV compact crossover? Goodwill from the American people? The ability to keep in-house development looking past a short-term fad for EVs?
So here’s today’s puzzle: if you were Akio Toyoda, would you A) double down on Tesla, and buy a controlling share or even roll it into the parent company, B) quietly sell the stake and move on, or C) keep Tesla around as a speculative EV offshoot of the main company? It’s a complex question, and answers should touch on the market potential of EVs, Tesla’s strategy and viability, Toyota’s relationship with EVs, the PR benefits of keeping an American EV startup alive, and much, much more. Enjoy!
Is Toyota asking this question?
There’s a lot of clever tech involved in the battery management of the tesla. You may read about Karma’s and this and that but , up until the miev, this was the only viable EV. It is still the only truly desirable EV.
For short money Toyota has access to this tech – they’ll recoup it on the rav4 and the rest is gravy.
Of course , if you think it’s a “short term fad” – then your question becomes rhetorical – in which case I’ll return to my “special” video sites.
There’s a lot of clever tech involved in the battery management of the tesla.
Battery management? I haven’t seen any new technology in Tesla’s battery management. I’ve looked at Tesla’s battery pack technology. Is that what you mean? Tesla has a patent portfolio on that, but there’s nothing interesting or new there. Panasonic’s engineers have forgotten more about electric car battery packs than Tesla’s engineers ever knew.
Sooner or later, it’s going to be obvious to everyone that Tesla missed their window for success. Toyota should hold until they finish extracting whatever tech they can. Then, dump like a hot potato if it’s still high, or buy the rest for pennies on the dollar if the end is in sight.
What SVX pearlie said. Also don1967 and SexCpotatoes. Except I couldn’t say it like that (any of that), and there was no symbol thingie to hit next to the post(s) indicating “thumbs-up” or +1, or smiley face nodding head. That stuff.
1. Steal any worthwhile technology.
2. Improve or change it enough to make it my own.
3. Kill Tesla. Bankrupt them, whatever.
4 Profit.
As low an opinion as many here seem to have of Tesla’s, or Silicon Valley’s, engineers when it comes to car building, the Valley is still home to more brilliant engineers than just about anywhere on the planet. Most of the silliness that seems to turn people off about the place, is really due not to a lack of engineering expertise, but rather to all the parasites that have flooded in as an integral part of the wholesale financialization of America since Nixon severed the last ties to gold. The brains are still there, they’re just stuck worrying more about legal and regulatory mumbo jumbo, as well as how to please the ones with preferential Bernanke access, than about simply building great things.
So, regardless of whether Tesla current product mix per se is profitable, a company as dependent on recruiting engineers as Toyota could do a lot worse than maintaining a presence there. Particularly since in Toyota’s erstwhile stomping grounds, they stopped making babies / future engineers long enough ago for the last one to be nearing retirement just about now.
Step 1: Sell high. Bundle the Prius and Tesla brands together and spin them off in an IPO. There will never be a better time to sell these “new era” fashion trinkets than right now, while the public is still ignorant of all the improved ICE technology coming to market.
Step 2: Buy low. Invest the money in Corolla and Camry. Beat Hyundai at its own game, rather than falling behind GM-style. The future is not a Prius, it is a Corolla from this millennium.
Except Tesla has already held it’s own IPO and is currently burning through all the millions it raised. Tesla will be a footnote, not a going concern in the future.
since Nixon severed the last ties to gold.
And there you have it, between F.I.A.T. money, the Federal Reserve, Fluoride and Commies from Mars in their junker saucers with their 8 kids with 64 arms stealing all the good jobs, it’s no damn wonder we’re going to hell in a handbasket.
I mean, WTF? How did we get here? Korean Cars? Hell, we doooooomed!
Also: Sky, it is falling.
B) quietly sell the stake and move on, or C) keep Tesla around as a speculative EV offshoot of the main company?
I would choose the lesser of 2 evils. But not sure B or C is more palatable. Perhaps C and keep her a bit above life support, but not going to throw good money after bad money.
Until better battery more efficiency, smaller footprint arrives, EV aint going to be movers & shakers.
U think Panasonic or any of the Jap engineers wont have a vay of doing Ev better?
So Toyo had dropped 110 mil into Musk. Thats really chump changes to them, something let Uncle Sam knows just be gentle use lots of KY in this hearing or else I wont be able to help out Tesla no more.
OT my buddy’s ex Victoria BC taxi 1st gen Prius, somehow the battery had out lasted the transmission.
He bought it and needed a new trans and new brain, is running well now, except every so often he get flag or people looked at him funny. Since he’s not an ethnic minority, as Blanc as is going to be, he’s Scandinavian.
Buying too much into Tesla would mean they would be responsible for NUMMI again, and that opens up the possibility for the return of the UAW. And there is no benefit in that for any company.
Aside from that, Toyota has their own EV tech which they have been developing for years. They probably know better if their own tech is better then Tesla’s or not (based on the new RAV4 EV). But most of the technology and cost involving EVs is more in the production of batteries, and this is in the hands of the battery supplier; Panasonic EV.
The second crucial component is the acquisition of raw materials, everything from lithium to rare earth metals. In the next decade there will be competition for these resources. Toyota Tsusho will massively aid Toyota or Tesla’s EV development due to the fact they are spending billions of dollars right now on lithium and rare earth mines. Having complete control of the raw materials until it is transformed into product and sold to the consumer is going to be a major advantage in EVs.
This vertical infrastructure is going to separate the men from the boys in EV cars. Car companies with strong mining and shipping operations will be at an advantage.
The Rav4 EV will make as much financial sense as the Leaf or Volt. None. Will they still sell, or more likely lease, absolutely. So, it isn’t really about making financial sense with EVs… not yet.
But one has to wonder why Toyota invested in Tesla anyway. Was it to have smaller losses with NUMMI (I am only guessing there). Was it to get Tesla techonology? A 50 million dollar prototype with all of Tesla’s technologies might be a good investment, especially if Tesla goes belly up and there are no royalties to pay for the technology, might be the case considering Toyota’s recent lawsuits with its HSD tech.
I doubt Toyota has any real interest in buying or controlling Tesla. But then again, maybe they can’t resist GM’s play book and want to buy several sub brands to have under the parent. I doubt this is the case.
Tesla starts to look more and more like Ballard. Remember them? All the car companies were vying to enter into partnerships with Ballard to get access to their fuel cell technology. Ballard went public, and its market cap went over $1 billion even though it had no real products or business plan.
Look how that all turned out. I’m afraid Tesla is going to be the same. I still can’t believe that the federal government invested in Tesla even though it has only one product, the Roadster, and it is ending sales of that. What were those people at the Department of Energy thinking?
If I were running Toyota, I would complete the acquisition of Tesla and make it a sub-brand. Imagine Toyota Prius, powered by Tesla Technolgy. I think it would be enough to dazzle the sheeple.
However, the fly in the ointment is Daimler. Don’t they still own a piece of Tesla?
Toyota should complete the aquisition and own the only other electric car brand name aside from the Prius that means a damn thing to the general public. The way I see it Tesla has produced only two things, a cool Elise variant and a seriously impressive amount of public awareness in their product. Hate him or not (I’m indifferent), but the man deserves some serious credit for doing the “tivo” thing to a never before heard of car company, and one with almost nonextistent product volumes. That name is squandered if he follows the rest of the tivo gameplan, Tesla deserves to be exploited, and that’s not a bad thing.
There are no financial up sides or practical considerations in buying a full sized EV, it remains a PR game, and Tesla is the only visible EV brand that plays to a higher price point (the Volt is accidentally expensive and the Prius is an economy car, and not an EV yet anyway.) You could actually make money selling sporty electric cars at Tesla prices.
It was Martin Eberhard who was the PR genius, and he was unceremoniously booted out of the company after his PR genius was not matched by production genius. I agree with Tedward that Martin’s PR legacy is the value that makes the company worth owning today, if anything does.
I actually think, based on the evidence I’ve seen, that Martin did as good a job as anyone. Any totally new design is going to have design and production snafus, especially when you have a small, overworked staff. So shed a tear for Martin; I hope for his sake that his investment in Tesla proves profitable in some way or another. (I don’t know Martin but enjoyed reading his stuff and checking out his PR style while he was at Tesla.)
The Leaf seems to be attracting a lot of buzz, and it’s actually a viable economic proposition if you take the government subsidy that’s on offer. Well, as long as you drive under 60-odd miles on a typical day.
I would think the Tesla image would be much more compatible with Daimler as a partner than Toyota. Toyota doesn’t seem to have done well at producing luxury versions of the Prius.
D
Tesla is absolutly pointless to Toyota. Toyota is FAR superior in every way to the freaks at Tesla who have very little experience with physical reality. Tesla is a goofball company that exists to stroke egos of it’s owners in the mainstream media.
why buy up tesla now. wait for it to go bankrupt and buy its patents up pennies on the dollar.
the “investment” in tesla was really just slight of hand to fool the public. $50 million dollars in PR to get rid of the nummi plant and have a tenant in it, is chump change to toyota.
the publicity of a tesla rav4 alone is less than probably the cost of this whole thing for toyota. i mean $50 million dollars is basically advertising money…
C. $110 million means nothing to Toyota.
There must be more technology than meets the eye for Daimler & Toyota to invest in Tesla.
So I will leave this as an unknown.
However, since Toyota is already in the pond they might as well go swimming.
If Toyota/Tesla could build a simplified car in the spirit of the Roadster rather than the ‘S’, then in theory the car could be designed to be maintenance free and low cost. If it was light and RWD it wouldn’t even need tire rotations. Get there and Toyota could bypass their own dealer network using the co-branded Telsa name and retailers like Best Buy.
They could offer two options:
Buy the car & battery -OR- buy the car & lease the battery. By leasing the battery it would artificially show a lower cost for marketing.
No trade-ins.
Next do the same thing with the chargers. Buy or lease.
License & certify the installers.
Add charging stations at all retailers and malls. Swipe your Telsa card, debit card, or credit card.
Create the Best Buy/Tesla pre-approved credit card. Doing this you can easily calculate your payment yourself.
Use this card, cash, debit, or your own credit card. (or mix) Step up to the counter and check-out without any hassle.
I see a lot of revenue streams here, especially financing.
Your Toyota appliance has totally arrived.
Renault is going to do that battery-leasing program as you’ve suggested in Europe. Clearly Nissan-Reanult are experimenting on different ways of getting EVs to the consumer. Its around €72/month, and it may not be a bad idea.
It would be nice if they made most of the car modular. A consumer could buy different batterypacks 16kwh, 24, kwh, etc. To have some linear path of upgradibility of the same car. 5 years in the owner may want the new next-gen battery released. This sort of modular sales are possible with EVs that weren’t with ICE.
Toyota, and others, are taking it further. They are developing in-wheel hub motors. There have been tons of concepts with motors integrated into the wheels, but actual production is much more complicated as it requires a complete redesign of the suspension system. Which is why all EVs still use driveshafts.
In-hub motors will not only decrease unsprung weight, it will allow for 4-wheel steering, and 360 rotating cars. It also allows for more modularity and fungibility between platforms. 4 in-hub wheels can fit virtually on any platform; big or small.
Maybe with EVs we need to rethink of how we own cars. Maybe we invest in a platform, we invest in the battery and motor separately. In five-years time maybe instead of buying a completely new car we can upgrade the battery and motor and drive it like its new. Maybe we can keep the same battery and motor and put in a new platform.
There are a lot of possibilities with EVs for new business models. Selling EVs in the old mononuclear ICE car mentality is
Toyota’s current investment in Tesla amounts to a hill of beans when compared to what they would sink into their other business units. They have every reason to keep a partnership that affords the most flexibility while allowing them to gain access to some technology.
Absorbing Tesla would be silly since it does little to bolster Toyota versus where they’re at now. Plus look at how expensive Tesla is trading right now!
Selling off Tesla quietly is also silly since it relinquishes access to the technology and would pass the PR-friendly all-electric moniker to the competition.
They’ll hold their status quo until there is a triggering event to change their stance on what they can best leverage out of Tesla. This will probably happen in late 2011 or early 2012 as Tesla nears its very important milestones within their “for-the-masses” EV development.
Just for fun look up the capital spending and R&D spending that Toyota spent last year. Then compare that to what they’ve sunk into Tesla. Truth is in the numbers – Tesla is rounding error to Toyota’s annual cash spend, and at this time Tesla presents a bargain resource.
And as always if you think Tesla is a doomed failure go play the options market to cash in when they go bankrupt. You can always hedge yourself by being long in Toyota as well.
Have you looked at Tesla’s market cap lately? Nearly $3 billion. Its shares are nearly double the IPO price (even though it’s losing money hand over fist).
What could Toyota ever get from buying Tesla that is worth that kind of money?
I don’t know about Toyota buying Tesla while the stock is so high, but if I were Toyota I’d probably vastly increase the partnership, and help them become established as a niche maker of high-end, sporty, luxurious autos. Sort of like a Lexus of EVs. And maybe help electrify such existing ICEs as the Rav4.
That’s really the only shot Tesla has ever had anyway: high-end boutique manufacturer and/or power train supplier, probably with the backing of a parent corporation, like Lamborghini and Audi. Tesla might pull it off, but it’s not ever going to make a cheap, high-volume “car for the masses”. Nissan’s already about to try that with the Leaf, and others are probably not far behind.
SELL! Toyota got Tesla to buy the white elephant NUMMI factory, a win, and any further involvement will likely be a net loss.
Buy! I can see the Toyota’s, well actually Lexus’s (Lexi?) at first with “powered by Telsa, suspension by Lotus” badges all over them. Everyone knows what a Prius is and a good amount of people know what a Telsa is. Pretty soon they’ll know Leaf and Volt. If Toyota buys Telsa they become an EV powerhouse. Some may argue that they already unbeatable in the EV arena, but the competition is coming and the only way for Toyota to maintain their lead is make another jump ahead.