Thoughts on Toyota-Tesla partnership

My, how has the automotive industry changed. A few years ago, Toyota was the top of the world, the darling of the media and the public. The steady growth of sales, the reliability of vehicles and the leading position in hybrid power and other fields have promoted the company's development.

The glow of the Prius proved to be a powerful effect that lasted for years. The sky isn’t falling – the company achieved a profit in the past quarter, but there is no doubt the Toyota name has been tarnished.

Then there’s Tesla, a start up company that formed out of nowhere in 2003 with a goal to sell mass-market affordable hybrids. To achieve that, the company worked in concert with Lotus to develop its first vehicle, the Roadster. It was always a difficult goal for the company to ever hope to achieve mass-market success without a large manufacturing partner.

As such, along the way Tesla teamed up with Daimler. The company supplied Daimler with an electric drivetrain for the Smart, and Daimler in turn purchased a 10% stake in Tesla. There is a large amount of confidence being placed into Tesla – the Daimler investment, $465 million Department of Energy loan and now Toyota getting involved.

The implications of the Toyota deal could have far-reaching effects in the future. For one, on Toyota’s part it is a de facto admission that they have fallen behind in the electric car race. Ironically, Tesla’s existence is what spurred on GM’s recently-retired Bob Lutz to push for the groundbreaking Volt extended-range electric vehicle to be produced.

If a small start up like Tesla could do it, GM could – or so the thinking went. In typical fashion of GM years back, Toyota dismissed the Volt. Now, they are finding themselves behind the times as a raft of competitors prepare to introduce Volt competitors and pure electric vehicles.

The thinking is that Toyota’s stake in Tesla could be a quick way for the company to get into electric vehicles. This deal helps to ensure Tesla remains around by having the backing of yet another large manufacturer, as a well as a manufacturing facility to produce Model S and its electric drivetrains.

Toyota’s President Akio Toyoda made some interesting comments about the deal: “Through this partnership, by working together with a venture business such as Tesla, Toyota would like to learn from the challenging spirit, quick decision-making, and flexibility that Tesla has. Decades ago, Toyota was also born as a venture business. By partnering with Tesla, my hope is that all Toyota employees will recall that ‘venture business spirit,’ and take on the challenges of the future.”

Likely, Toyota will be taking a “wait and see” approach with this, letting Tesla undertake the hard task of getting the Model S on the road. If the company is successful, there is a good possibility of further cooperation. Maybe Tesla electric drivetrains in Toyota vehicles, a larger stake in the company? Who knows, there are a lot of potential outcomes.

In the short term, this move is beneficial to Toyota in several ways. It demonstrates the company's support for alternative fuel efforts and active public relations in California by ensuring the future of the former NUMMI plant in Fremont, California. To me, it looks a little desperate. In any case, this is good news for Tesla fans. The dreams of Model S and new players in the field of electric vehicles are closer than ever.