Toyota, Tesla alliance helps present and future

May 24, 2010

Toyota’s Prius is sometimes known as the Pious. The pioneering but earnest electric car could do with an injection of supercar glamour from Tesla Motors’ Roadster, and vice versa from a practicality standpoint.

Combining the two companies’ electric vehicle nous ought to be bear future fruit. But with both Toyota’s recall-battered U.S. reputation and Tesla’s planned IPO in need of a boost, the partnership also helps with today’s concerns.

Aside from associating itself with Tesla’s innovative image, Toyota’s reputation in California will be burnished by the reopening of the former NUMMI car plant, closed just weeks ago. Tesla has bought part of the site and will make future models there, including the Model S sedan, due in 2012. The NUMMI plant was a long-running joint venture between Toyota and General Motors.

Tesla, meanwhile, filed for an IPO earlier this year. The company lost $56 million in 2009; it could face a hiatus in output between the end of production of the Roadster and the launch of the more affordable Model S; and it may need to spend several hundred million dollars tooling up at the NUMMI site. Despite its green credentials, founder Elon Musk’s track record and dotcom aura, that’s a recipe for a tough sell, especially in jittery markets. A partnership with the giant Toyota — and a promised $50 million investment right after the IPO — adds a needed dose of credibility.

Tesla has already accomplished a lot, against the odds — eclipsing Detroit’s electric car efforts in the process. But to succeed in building its innovative ideas to profitable manufacturing scale, it needs to think Motown, or in this case Toyota City, as well as Silicon Valley. Tesla already availed itself of U.S. government loans aimed at promoting efficient vehicles. It even had an investment from Daimler — but the agreement with Toyota looks to have more potential.

General Motors famously failed to learn enough from its 25-year NUMMI joint venture with Toyota until it was too late to save the company from bankruptcy. Now, on a smaller scale, it’s Tesla’s turn. The hope for both firms is that the partnership advances successfully from mere appearances today to real profits tomorrow.

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