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Tesla and Toyota to Partner on Battery Cars

Silicon Valley start-up to take over old NUMMI plant.

by on May.21, 2010

Tesla is taking over Toyota's old NUMMI plant to produce the Model S sedan.

Already partnering with German giant Daimler AG, the aggressive little California battery car maker, Tesla Motors, has just jumped into bed with another major automaker.  This time, it will partner with Toyota and take over the plant the Japanese company was abandoning in the suburbs of San Francisco.

Toyota plans to invest $50 million in Tesla, which was founded by the Internet billionaire Elon Musk.  The State of California, meanwhile, will provide tax abatements worth another $20 million to help support Tesla’s takeover of the old NUMMI assembly line – which Toyota originally operated in partnership with General Motors.

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The facility will be used to produce Tesla’s second product line.  With production of the original Roadster winding down, the Silicon Valley start-up is getting ready to launch a sedan it has dubbed the Model S, starting sometime in 2012.

“I sensed the great potential of Tesla’s technology and was impressed by its dedication to monozukuri (Toyota’s approach to manufacturing),” said TMC President Akio Toyoda, explaining the decision to partner with the small battery car maker.  “Toyota was also born as a venture business,” he added, suggesting 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.”

Tesla initially plans to produce 20,000 Model S battery cars annually.

At a news conference attended by California’s “Governator,” Arnold Schwarzenegger, and Toyota CEO Toyoda joined Tesla CEO Musk as he revealed plans to employ as many as 1,000 workers at NUMMI and produce about 20,000 of the battery-electric vehicles, or BEVs, annually, at least initially.

“The new Tesla factory will give us plenty of room to grow,” said Musk, who hinted that other models are under development and could eventually bring employment at the plant up to as much as 10,000.

That would be significantly higher than in years past and raises questions about the economics of producing future Tesla products — which already have to cope with the high cost of lithium-ion battery technology.

On the other hand, the new partnership with Toyota is expected to generate not only cash but know-how that Tesla will be able to use to streamline its vehicle development and production processes.

“We look forward to learning and benefiting from Toyota’s legendary engineering, manufacturing, and production expertise,” said Musk.

The Model S marks a significant shift for the start-up in that the original Roadster was based on a Lotus design, built in the U.K., and then outfitted with a Tesla battery drivetrain.  The new sedan will be produced entirely by Tesla.

The announcement that the battery car maker will move production to Fremont came as an unpleasant shock to another California community, Tesla originally planning to produce the Model S in Downey.  Musk says he may still put some other operation in that jilted community, possibly one involving his private rocket venture, Space-X.

It’s unclear how the alliance with Toyota will impact some of Tesla’s other partnerships, notably with Daimler, for whom it’s providing battery drive systems for the electric version of the Smart fortwo.  But Tesla has long made it clear it hoped to set up a series of alliances.

Another uncertainty is the role the United Auto Workers Union will play in running the new Tesla Factory.  When running under the NUMMI banner, the facility was Toyota’s only unionized assembly plant in North America, a result of the partnership with GM.

“Our union’s hope is that this venture will give first hiring preference to former NUMMI employees who are already trained and highly skilled,” said a statement issued by Ron Gettelfinger, the UAW’s president.

The union is also hoping to gain a foothold in Delaware when another battery car start-up, Fisker Automotive, launches production at a former GM plant it will take over for a midsize model codenamed Project Nina.

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One Response to “Tesla and Toyota to Partner on Battery Cars”

  1. Hiring back NUMMI employees with a union contract is the best move. They already know how do their jobs well. During the last 2 internal audits at NUMMI, they achieved the lowest defects of all Toyota plants. Trucks even got a 0.00 defect (DPV) which is unheard of.