Toyota's $50-million investment in Tesla Motors is a win for both companies, but it's probably not a sign that Toyota has significantly changed its technological course, experts said last week.
"It's a very shrewd move for both parties," notes Jacob Grose, an analyst for Lux Research. "But I doubt that Toyota has changed its gospel and all of a sudden believes in EVs."
The investment announcement, made on May 20th, represented an apparent turnabout for the giant automaker. Toyota said it planned to cooperate in developing electric cars, parts and production systems with Tesla, a small manufacturer of pure electric cars. As part of the deal, Tesla said it would buy a closed Toyota joint-venture plant in California to build its Model S, a big electric car said to have a 300-mile range.
The move came as a surprise to many in the auto industry. Still, it left some doubtful about Toyota's near-term commitment to EVs.
"They're basically saying, ‘We're not going to spend the billion dollars that GM spent to develop the Volt,'" Grose says. "So they said, ‘How can we get into EVs on the cheap? That way, we maintain our brand image and we stay in the game, just in case we're wrong and these cars start selling.'"
In earlier statements, Toyota has repeatedly indicated that it believes the industry's future lies in hybrids, not in pure electric cars. During an interview with Design News at the North American International Auto Show in January, a Toyota spokesman acknowledged that the company planned to roll out a "small urban commuter" EV in 2010, but added that Toyota is "basically a very conservative company" that only invests seriously in products that can be sold in high volumes.
"We did that once with the RAV4 and the world wasn't ready," the Toyota spokesman said, referring to the company's foray into electrics a decade ago. "We sold about 500 a year. The batteries were hideously expensive."
Recently, however, Toyota executives gushed over Tesla's EV technology. "I've felt an infinite possibility about Tesla's technology and its dedication to monozukuri," said Toyota president Akio Toyoda in a statement published on both companies' websites. "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."
Tesla made a name for itself with the introduction last year of the Tesla Roadster, a $109,000 two-seat vehicle that exceeded expectations with its 244-mile driving range. In 2009, Design News gave Tesla chief engineer JB Straubel its Engineer of the Year award.
To be sure, many other automakers have announced plans to launch so-called "battery-electric" cars. Nissan, Ford, BMW, Infiniti, Chrysler, Tesla, BYD, and Coda Automotive and others are building pure EVs, while General Motors is putting the finishing touches on its highly-touted Chevy Volt, a plug-in hybrid.
Many in the industry describe the move to electrification as inevitable. "It's becoming clear that we've got a couple of decades to substitute for petroleum in a major way, and the only near-term viable solution is electricity," notes John B. Heywood, professor of mechanical engineering and director of the Sloan Automotive Lab at MIT. "There's a change in attitude and that's a big factor behind a lot of the auto companies creating programs in vehicle electrification."
Still, many analysts are unconvinced that Toyota's investment in Tesla is a major step in that direction. "It's a great solution for Toyota," Grose says. "They can spend maybe a tenth of what an EV program would cost, and they get a fairly well-known partner in Tesla. But I don't believe that Toyota has changed its mind and is suddenly a believer in the economic viability of electric vehicles."