Automotive > Powertrain, Body, Chassis & Safety Blog

Toyota Invests $50M in Tesla – But What Is It Buying?

by Ian Riches | May 21, 2010

The recent news that Toyota is investing $50M in buying a stake in US electric vehicle maker Tesla is arguably Toyota’s most significant activity in the nascent electric vehicle market to date.  Although it owns some 70% of the hybrid vehicle market, its activities in the pure EV market have been modest compared with many of its competitors. It has been matched in its lack of enthusiasm for pure EVs by Honda, which occupies the #2 slot in the hybrid market, with head of research and development at Honda, Tomohiko Kawanabe, recently being quoted as saying: “We are definitely conducting research on electric cars, but I can’t say I can wholeheartedly recommend them… It’s questionable whether consumers will accept the annoyances of limited driving range and having to spend time charging them.”  However – Honda has made significant investments in fuel cell technology, whereas Toyota has shown reluctance to consider anything other than its “Plan A” for vehicle electrification – the hybrid. However – before getting too excited over the relevance of Toyota’s move in investing in Tesla is – it is worth looking at the sums involved.  $50M may initially sound like a lot of money – but it is way less than the current round of re-calls that Toyota is having to initiate.  These have been estimated as potentially exceeding $2 billion – once lost sales and warranty payments are taken into account.  The Tesla deal – which includes Tesla taking over a recently-closed NUMMI and creating 1,000 jobs, will likely play well with the American – and especially Californian  – public.  The deal has already been warmly welcomed by Governor Schwarzenegger.   This deal certainly has damage-limitation and image-boosting aspects, as well as purely technical ones. Toyota thus seems to be thawing in its attitude to EVs – but a large part of this may just be post re-calls signs of a bit less certainty in its own infallibility emanating from Toyota City.

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