The Toyota/Tesla/NUMMI deal appears to be pretty darn significant

reikiman's picture

I put together a set of articles on the Toyota/Tesla deal (links below) and it looks to me like a significant step. This is a summary ...

Background: An interesting factoid is that the NUMMI plant is the last U.S. auto assembly plant west of the mississippi river. That's either because the auto industry outsourced itself to other countries, or else concentrated itself in the eastern half of the country. In the past there were other plants in the SF Bay Area such as the Ford plant in Milpitas which is now a mall. This was originally a GM plant, opened in 1962, then in 1982 GM and Toyota started operating the plant together. The idea was that GM was to learn modern management techniques from Toyota and become a better company. GM failed to learn anything and the plant was primarily producing Toyota branded vehicles. A few GM branded vehicles were built there but the ratio was in the neighborhood of 90% Toyota branding. The plant produced over 400,000 vehicles in 2006ish and had a stated capacity of perhaps 500,000 vehicles per year. It employed over 5000 people at times, mostly UAW unionized workers. In the throes of GM's near death experience last year the GM/Toyota/NUMMI partnership was dissolved and shortly after that Toyota decided to shut down the plant. The official shutdown was on April 1, 2010.

Toyota has long resisted producing battery EV's and insisted that hybrid cars were sufficient. Toyota did produce the RAV4-EV and owners of that SUV are happy with them. I've driven in two of them and they are competently built EV's. For example as a passenger it feels very normal, even riding down the highway at highway speed feels like any gas powered SUV. Despite the praise they get for the RAV4-EV there's no plans to build any more, and the existing RAV4-EV's were in any case hand built conversions rather than produced on a regularized factory line.

This is the first head-scratcher - just what is Toyota after? There isn't much solid information and some articles say they're still hammering out details. But if Toyota isn't interested in EV's then what are they doing hooking up with Tesla?

Some articles make a claim that Tesla is falling behind Mitsubishi and Nissan. With the Prius, Toyota has had a lot of thought leadership credibility due to creating a very popular green car. But their runaway-Prius problem is one problem, and both Mitsubishi and Nissan are coming out with (or already have) credible EV's that stand to become popular. Mitsubishi and Nissan would appear to be taking thought leadership. I can't imagine though that sales of either the iMiev or Leaf will be approaching sales volume of the Prius any time soon.

Some articles claim the two companies are planning to develop a range of smaller affordable electric cars. That will be fun to see, if true.

Tesla's background strategy was to stay at a relatively small production level. In theory a smaller company could be profitable at a smaller production volume at which a large company would go bankrupt. The large automobile companies are modeled on hundreds of thousands of vehicles per year sold. Thus a large company has to develop car models which sell in huge volumes. Smaller companies can use smaller factories that cost less to run and be profitable at smaller volumes. Tesla's strategy was to stay in this realm, so it's a head scratcher why they're "buying" such a large plant as the NUMMI.

If Tesla is to remain at a 20,000 car/year production volume that's expected for the Tesla Model S, how can they possibly use a factory with a 500,000/yr capacity? Indeed the articles quote Tesla people saying that they're only going to use a corner of the factory.

See: How much of the NUMMI plant will Tesla use?, and In surprising move Tesla Motors and Toyota announce NUMMI partnership

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