Toyota revealed over the weekend that it had sold off all of its remaining shares in Tesla Inc., the Silicon Valley-based battery-electric automaker, ending what had once been seen as a promising tie-up.
The move – which, it turns out, was completed by the end of 2016 – comes as Toyota ramps up its own, tenuous electric vehicle program, shifting some of its resources away from its long-standing hydrogen fuel-cell program.
“Our development partnership with Tesla ended a while ago, and since there has not been any new developments on that front, we decided it was time to sell the remaining stake,” Toyota spokesman Ryo Sakai told the Reuters news service, adding that the move was part of a periodic review of investments.
The timing would suggest that Toyota made a solid profit on what had originally been a $50 million investment for a 3% stake in Tesla, which is based in Palo Alto, California. But the Japanese maker might have missed an opportunity to turn even greater returns had it held onto its TSLA shares a bit longer.
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It’s not clear precisely when Toyota sold its holdings off, but Tesla hit a 52-week low of $181.47 on Dec. 2, 2016, marking the bottom of months-long doldrums. It began to rebound at that point, topping $200 by the holidays, nearly $220 when Wall Street reopened in January, and in recent days, shares have closed as high as $341.
Of course, for a company the size of Toyota, the difference would barely come in as a rounding error on its bottom line. What’s perhaps more significant is what the decision to sell off its holdings says about the direction the two makers have been taking.
When Toyota first teamed up with Tesla, the U.S. company was little more than a gleam in CEO and founder Elon Musk’s eyes. It was then working up its first production model, the extremely low-volume Roadster, and there was a widespread view that Tesla would have a good chance of folding before its Model S sedan could make it to market.
In actuality, Toyota wasn’t the only major company that invested big money into Tesla. Daimler AG followed Toyota’s lead investing $50 million into the EV maker, giving it a timely economic boost.
“Both Daimler and Toyota played key roles in making Tesla Motors the company it is today. Musk himself admitted Daimler’s timely $50 million investment in 2009 as a key to the company’s early survival. And Toyota’s $50 million investment when the company went public, along with a supply agreement for the RAV4 EV, gave investors confidence to believe in the company. The financial impact for both companies was substantial,” the website the Motley Fool observed.
When Mercedes-Benz parent company Daimler AG announced that it had sold its stake in Tesla Motors Inc. for a whopping $780 million in profit in 2014, observers then speculated that Daimler had concluded that Tesla stock was already overvalued. Daimler said it was selling to help raise funds for its own development projects. Toyota held its share a bit longer.
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Feeling pressure to come up with clean powertrain technology, especially by California and other states adopting emissions standards tougher than federal guidelines, Toyota decided to turn to Tesla rather than launching its own major EV effort. The two came up with a battery-powered version of the familiar RAV4. Sales were modest, at best, and the battery-electric SUV only lasted in production for a couple years.
There was plenty of talk about other joint ventures. And Toyota appeared to be signaling a longer-term affiliation when it sold Tesla the by-then abandoned Fremont, California, assembly plant it had once operated as part of a joint venture with General Motors.
But soon afterwards, the two signaled that they were parting ways, at least in terms of product development. That was no surprise, as Toyota shifted its attention to hydrogen power, something Tesla CEO Musk openly derided as “fool cells.”
For its part, Toyota insisted the technology was a better long-term investment, among other things overcoming key problems with battery power, notably range and charging times. The automaker was particularly skeptical about lithium-ion technology, sticking with older, if less efficient nickel-metal hydride batteries for products like the Toyota Prius hybrid
Toyota last year launched its first fuel-cell vehicle, or FCV, the Mirai, in the U.S., though sales are limited to narrow sections of California where hydrogen is available to consumers. That challenge limits two competitors, Hyundai and Honda, with their own FCVs.
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While Toyota insists it isn’t giving up on hydrogen power, the industry giant last November formed a new unit to develop battery-based vehicles, finally accepting the need to shift to lithium technology for most of its products going forward. It has launched a plug-in version of its popular hybrid, dubbed Prius Prime, and is reportedly working up new all-battery models that could, in the years ahead, put Toyota and a collision course with one-time ally Tesla.
Joseph Szczesny contributed to this report.
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