Tesla, Toyota Join Forces for EV Development; Tesla to Buy Ex-NUMMI Plant
By Scott Doggett May 20, 2010
Above, the former NUMMI factory in Fremont, Calif. It had been jointly operated by General Motors and Toyota for more than 20 years. Tesla Motors will buy it from Toyota and manufacture the Model S battery-electric sedan there.
By Scott Doggett and John O'Dell
PALO ALTO, Calif. - Tesla Motors will team with automotive giant Toyota Motor Corp. to jointly develop electric vehicles, the companies' chief executives said today.
As part of the stunning partnership announcement - Toyota will take a $50 million stake in Tesla - Tesla CEO Elon Musk also said his company will purchase the sprawling Fremont, Calif., assembly plant that Toyota closed earlier this year.
How much it will pay Toyota for the factory wasn't disclosed, but the two companies intend to jointly use the factory, until recently operated by Toyota and General Motors.
Tesla will build the Tesla Model S battery-electric sedan there and the two automakers will develop and produce other electric vehicles at the site as well, Musk and Toyota CEO Akio Toyoda said at a 5 p.m. press conference.
Gov. Arnold Schwarzenegger, who was in attendance, said Tesla's decision to locate its Model S factory in California - the factory in Fremont, near San Jose, is fewer than 20 miles from Tesla's headquarters - will bring 1,000 new jobs to the state.
Tesla's Musk corrected him minutes later, telling dozens of reporters from around the world that the number of new jobs will ultimately be closer to 10,000, with about half of the hires by Tesla and the rest by suppliers.
Tesla had been negotiating with the Southern California cities of Downey and Long Beach regarding a factory site for its Model S.
Musk said the company realized only yesterday that it could afford to acquire the former NUMMI plant, which closed on April 1 - a year after the GM-Toyota joint operating agreement was dissolved in GM's bankruptcy.
Tesla will purchase the nearly 400-acre facility from Toyota, apparently using a big chunk of the $465 million federal loan it received earlier this year to finance redevelopment of an existing factory for manufacture of advanced technology vehicles such as EVs.
"Could a deal be put together? Could Tesla afford NUMMI? These were question marks that were only resolved yesterday," Musk said.
Tesla currently makes an all-electric Roadster with a base price of $109,000. The Model S (right) is scheduled to enter production in mid-2012, Musk announced today, and carry a base price of $57,400 before various state and federal tax incentives.
Within a year, production of the Model S, which will get a claimed 300 miles between charges, should reach an annual pace of 20,000 vehicles, he said.
Tesla and Toyota intend to jointly make electric vehicles at the former NUMMI plant, but neither Musk nor Toyoda - who flew in from Japan to attend the press conference - would go into details.
"The discussions are still at the early stage in terms of what kind of a vehicle that we would make," Musk said. "For sure the Model S would only occupy a small part of the NUMMI plant." Eventually, Tesla and Toyota will use all of the plant, he said.
The two companies intend to form a team of specialists to investigate the development of EVs, parts, production systems and engineering support.
It is likely that Tesla and Toyota want to use the giant Fremont plant to full capacity, building both Tesla and Toyota-branded electric vehicles there.
Tesla has long had a third, mass-market EV in its business plan, to be launched after the Model S is in production. The company has said it would like to price such a vehicle at under $30,000 to make it affordable to as many people as possible.
Toyota, too, needs an affordable EV for the U.S. and has shown a concept FT-EV (right) based on its iQ city car.
The world's largest automaker, which has long been queasy about the reliability of lithium-ion batteries - the kind needed for 100-mile-per-charge EVs - apparently sees Tesla's successful design of a lithium battery pack and especially the necessary safety and operating control systems for its Roadster as a way to help speed development of battery system that would meet Toyota's own performance and reliability needs.
In that, the Japanese automaker is taking a page from Germany's Daimler, which last year acquired a 10 percent stake in Tesla and is purchasing battery systems from the Northern California automaker for its upcoming Smart EV.
The ultimate size of Toyota's ownership stake in Tesla is unknown as it depends on the number of shares the company sells in its planned initial public offering this year.
Tesla said in its filing with the Securities Exchange Commission that it hopes to raise $100 million, and it is unclear whether Toyota's $50 million would be in addition to that or represent half the goal (typically, a company issuing stock for the first time sets goals well below the amount it believes it will raise - an image gimmick aimed at making those offerings look wildly successful).
Both Toyoda and Musk said they only began discussing the possibility of some sort of deal a month ago and rapidly reached agreement.
"I spent time at NUMMI and learned much about working in America there, so I feel a sense of attachment (to the plant)," Toyoda said.
Nothing was said about the possibility of rehiring all of the 4,700 workers who were let go when the plant was closed earlier this year, but Musk said Tesla has already hired a number of former NUMMI workers and will likely hire more as the plant ramps back up.
NUMMI was the only union-represented plant in Toyota's U.S. manufacturing array, but the UAW pact died with the closure of the plant. Tesla, born of the entrepreneurial high-tech cullture of the Silicon Valley, isn't likely to welcome a union with open arms.
Indeed, Musk said he would remain neutral, neither encouraging nor fighting any union activity once the plant begins hiring.
News of Tesla's Fremont deal stunned city officials in Downey, who had expected to vote today on a lease deal allowing Tesla to rent 20 acres of property in the city south of Los Angeles. Downey officials had spent months courting the automaker and said they were certain after meeting with Musk recently of clinching a deal for Tesla to locate its factory there.
"Tesla has been extremely disingenuous in their dealing with Downey, and I now have new appreciation as to why America is fed up with many large corporations," Downey Councilman Mario Guerra told the Associated Press. "This last-minute betrayal is even more shocking because (Downey) was hours away from signing the lease with Tesla that would have been an economic boon for the city."
Downey had offered to waive $6.9 million in rent in hopes that the plant could create up to 1,200 jobs and revitalize its reputation as Southern California's high-tech hub.
Schwarzenegger said that the state, using economic-development powers instituted several years ago, helped facilitate the Fremont plant purchase by providing Tesla with relief from sales taxes on the hundreds of millions of dollars worth of equipment the company will have to acquire to reactivate the plant as an EV manufacturing facility. The tax runs at about 10 percent, so Tesla would save $10 million on each $100 million worth of equipment.
The Tesla-Toyota deal likely bodes well for electric-vehicle dependent companies such as EV charging-station maker Coulomb Technologies, which expects 2010 revenue to jump tenfold to about $10 million as Nissan's all-electric Leaf and the Chevrolet Volt extended-range plug-in vehicle hit the market later this year.
The deal "was kind of surprising in the moment, but, retrospectively, it seems to make sense," said Coulomb Technologies CEO Richard Lowenthal, whose Bay Area headquarters are about 20 miles from the NUMMI plant.
Tesla cars "are wonderful little rockets. They have something," Lowenthal told Green Car Advisor. "Toyota wants to move forward into this space, and it was pretty focused on rescuing this NUMMI plant. It helps them with their time to market."
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Contributing Editor Doggett reported from Palo Alto.
Senior Editor O'Dell contributed from Los Angeles.
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