Posts Tagged ‘Tesla’

In time, this may become known as the worst deal of the century.

Toyota and electric car maker, Tesla announced yesterday a new partnership to develop electric vehicles and the necessary engineering and manufacturing support to back them.  As part of the deal, Toyota will purchase $50 million of common stock in Tesla as soon as the fledgling automaker goes public.  Tesla also takes over Toyota’s recently shuttered NUMMI manufacturing plant in Fremont, California for an undisclosed sum.

This is great news for Tesla.  But what’s not clear is why Toyota would agree to such a hugely lopsided deal.

Akio Toyoda and Elon Musk pose with California Governor, Arnold Schwarzenegger at a press conference Thursday (Photo: SF Chronicle)

Tesla has burned through $236 million in capital since it’s 2003 founding.  The Silicon Valley automaker has so far delivered about 1,100 of its $109,000 Roadster electric sports cars and hopes to produce its next vehicle, the Model S electric sedan, by the end of 2012.  Tesla also qualified for $465 million in federal loans last year to be used to purchase a factory and get the Model S to market.

The new deal gives Tesla a fresh infusion of capital and a deal to produce a Toyota-branded vehicle with a Tesla electric powertrain by 2012.  This gives the young automaker a vote of confidence from a major global player and a steady stream of revenue until the Model S comes to market.  Investors will no doubt be salivating in anticipation of the IPO.

Tesla also receives a modern factory with a trained workforce that’s eager to return to work.  Tesla has never manufactured a vehicle from scratch – the Roadster’s chassis and body is built by Lotus Cars in England – and Toyota will supply critical engineering support to get the two new models to market.  Toyota’s manufacturing expertise will allow Tesla to overcome an enormous hurdle that may have otherwise delayed the introduction of the Model S by many months.

Global recall scandal notwithstanding, Tesla also stands to benefit from Toyota’s reputation for quality and efficiency.  And since the Toyota-branded product will launch first, Tesla has time to iron out the kinks in their processes before the Model S comes to market.

The Tesla Model S on display next to the company’s $109,000 Roadster

But why would Toyota willingly enable a competitor with such a generous offer?

From a dollars and cents standpoint, the Japanese automaker will gain virtually nothing from this deal.  Toyota saddling up to Tesla is the automotive equivalent of MIT developing curriculum for the University of Phoenix.

Toyota does not need Tesla’s help to develop electric vehicles.  They’ve already proven their basic competency with the RAV4 EV of the 1990’s and are the undisputed market leader in gas/electric hybrid technology.  Toyota also has a joint venture in place to produce battery packs with Panasonic and has shown working prototypes of plug-in hybrids and hydrogen fuel cell vehicles.

Put simply, Toyota already knows how to work magic with electrons.

Is this partnership perhaps motivated by guilt from shutting down the NUMMI plant earlier this year?  Toyota CEO, Akio Toyoda reportedly met with Tesla CEO, Elon Musk for the first time six weeks ago, right around the time the NUMMI closed its doors.  Toyoda, himself, apprenticed at the NUMMI plant years ago and said that he, “learned much about working in America (there) so I feel a personal attachment to the plant.”

Though the CEO is obligated by Japanese business culture to provide for his workers, he must know that a niche manufacturer like Tesla is only capable of hiring a handful of the thousands of workers who were laid off at NUMMI.

The truth may be less about money and more about company culture.

Since coming to power in June of 2009, Toyoda has made it clear that he is unhappy with the trajectory established by his predecessor.  He berated his senior managers for allowing the company to grow too quickly, sacrificing quality and customer satisfaction along the way.  Weeks later, Toyota was drawn into a global recall scandal that has so far affected over 9 million vehicles worldwide.

The partnership may signal the fresh direction that Toyoda has been seeking.  The San Francisco Chronicle reports that Musk and Toyoda spent their time together talking and driving around Los Angeles in a Tesla Roadster.  It was a pivotal day for Toyoda, who said, “Simply put, I felt the wind, the wind of the future.”

“He really sees value in understanding how a fast-moving Silicon Valley startup operates,” Musk revealed of Toyoda. “He’s sort of looking at this and saying, ‘We need to go back and remember what it’s like to be a startup.’”

In a press release, Toyoda referenced his own company’s roots and said that 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.”  But if a startup spirit is all that the CEO is in search of, why not just hire some senior managers from Silicon Valley and allow employees to wear jeans every day?

The partnership instead removes an enormous barrier for Tesla, teaching them world-class techniques for how to build cars with impeccable quality.  The student will quickly become master and may soon threaten its own teacher.

For Mr. Toyoda’s sake, let’s hope that the inspiration he feels from this deal will translate to his own company’s products.

It’s not easy being green.

Automakers were dealt a tough blow this week by the Environmental Protection Agency in a ruling that decided that only the first 200,000 electric or fuel cell vehicles produced by each automaker will qualify for official “zero emissions” credit under new fuel economy rules.

Manufacturers have been tasked by the government to reduce the carbon dioxide emissions of their fleets by 30% to 250 grams of carbon dioxide per mile by 2016 (equivalent to 35.5 miles per gallon).  Electric and fuel cell vehicles, which produce no direct carbon dioxide emissions, were being counted on in some cases to improve the average and compensate for gas guzzlers elsewhere in the fleet.

“Right now, it’s pretty clear that the credit is needed for these vehicles,” a senior government official admitted to Reuters, speaking on condition of anonymity.

Under the new rule, any EVs produced after the cap would be held accountable for a share of the smokestack carbon dioxide created when power plants generate electricity.

David Friedman of the Union of Concerned Scientists explained, “Their tailpipes may have zero emissions, but you have to get the electricity from somewhere so they are not truly zero emissions.”

Automakers disagree, arguing that the new rule would be like accounting for the emissions created by the oil industry for conventional gasoline- and diesel-powered vehicles.

Gloria Bergquist, a spokesperson for the Alliance of Automobile Manufacturers, noted, “There is no precedent for holding companies responsible for the CO₂ generated by electric utilities.”  She argued to USA Today, “It’s unfair to base our compliance on what is entirely outside our control.”

Jim Kliesh of the Union of Concerned Scientists explained, “The issue is really [that] we want a true accounting of emissions.”  Ignoring the carbon dioxide associated with electric vehicle, “would be poor public policy,” he said.

But as the bankruptcies of GM and Chrysler demonstrated last year, the auto industry is on very shaky ground as it recovers from a severe collapse in sales and is being forced by global regulations to research and develop new fuel-saving technologies.

In other words: profits are down just as costs are skyrocketing.

And for an industry that requires enormous economies of scale to survive, Bergquist argues that 200k units over five years is unreasonable.  Nissan plans to produce 150,000 electric vehicles globally in 2012 alone, with a significant portion of those units slated for the US.

In some respects, the government recognizes the strategic need for oil-free alternatives.  President Obama has called for one million electric vehicles by 2015 and there are numerous state and federal tax incentives available to encourage sales.

But capping the CAFE benefit of electric vehicles at 200,000 units reduces a major incentive for manufacturers, who may now choose to invest their R&D dollars in other technologies.  The late-breaking decision also sends mixed messages to a slow-moving industry that needs stable regulations and plenty of time to research, design, and retool to meet them.

Is this new rule short-changing electric vehicles and automakers or is it a fair move to account for carbon emissions created elsewhere on the grid?

Tesla Kicked It Off

A couple of years back the whole world had their head spinning in amazement as Tesla, the small Silicon Valley company, launched their all-electric roadster. And while electric vehicles have been around before, Tesla made a traditionally niche vehicle available to the masses even if the price tag was well beyond affordable.

The “Tesla” movement surfaced a public outcry (“Why can’t the big car companies build these?”) that was so loud and energized that it compelled the government to loan Tesla $465M of our taxpayer dollars. Tesla got the money and now they have to figure out how to actually produce the $50K Model S they promised.

By now, many have already heard the back story that Lotus was the company responsible for building the Tesla Roadster (the Tesla is a modified Lotus Elise) and that Lotus is taking a year off production of the Elise, which means no Tesla Roadsters.  Yes, it kind of sucks if you don’t build your own electric cars. Tesla will be a legitimate car company, but we may have to wait a little longer than expected.

Porsche 918 Spider (source: autoblog.com)

The 918 Spyder – Not Groundbreaking, But Pretty Darn Exciting

One thing is for sure…  the world heard Tesla’s battle cry and the superstars of the sports car world are now warming up to swing their mighty fists.  At the 2010 Geneva Auto Show, Porsche took more than a swing with their new 918 Spider Concept.  While not all-eletric, the 918’s hybrid powertrain pushes this gorgeous cart from zero-to-sixty in 3.2 seconds. To add to the fun, it sips gas as a rate of 78MPG.

But before we get too excited, the truth is that these stats are skewed.  The car has different drive modes, ranging from gas sipper to full-burst electric racer.  On the high end, it’s only a few minutes of full electric torque blasting through the track. The 78 MPG is only on heavy electric mode, which only propels you for 16 minutes.  That’s not even a trip to the grocery store and back.

Audi E-Tron (source: NY Times)

The Audi E-Tron – Energized Mini R8

Late last year, Audi also showcased their latest sports car entry.  Unlike the Porsche 918 Spyder, E-Tron is all-electric and is almost like a Tesla Roadster with a real pedigree.  It’s 45-kilowatt electric motor will propel this car from 0-60 in a modest 5.7 second time. The car will also travel 155 miles on a single charge. While the car is beautiful, it’s performance is not stunning for what will be a high price tag out the gate.  Another beauty, this car is actually going to be produced in 2012 in small batches, similar to the earlier Tesla runs.

I’m not looking to refute Porsche’s claims or discounting Audi’s performance, but rather point out that everybody who already knows how to build cars is about to take a leap forward. It’s a glorious time for innovation and it looks like the big players will be taking center stage from here.  Thank you Tesla… you were a great opening act.