What the Tesla-Toyota Partnership Means, and Doesn’t Mean

News that Tesla and Toyota will work together represents a giant step forward in the development of sustainable electric-drive automobiles. In recent years, the two car companies have occupied the opposite ends of the spectrum: the ultra-conservative corporate behemoth that has dominated green car sales for nearly a decade—and the ultra-adventurous start-up with big ambitions.

Tesla Roadster

Toyota will buy $50 million of Tesla’s common stock, but more importantly it will be purchasing the company’s sense of daring and adventure. “When we look at Tesla’s venture business spirit, we recall how Toyota started back in the day,” said Jana Hartline, Toyota’s environmental communications manager, in an interview with HybridCars.com. “Toyota would like to learn from the challenging spirit, quick decision-making, and flexibility that Tesla has,” Toyota President Akio Toyoda, said in a press release.

What does Tesla get out of the deal? Simple: more legitimacy. It was almost exactly one year ago today that Daimler took an equity stake of 10 percent in Tesla. That was a big vote of confidence for Tesla, especially during a time when it had delivered very few vehicles.

Toyota FT-EV electric concept.

Toyota’s investment represents about a 2 percent stake in Tesla, according to Hartline. Yet, it represents an even bigger pat on the back for Tesla, as the company moves forward to produce its first electric sedan back by millions of dollars of government loans. Cynics could view the announcement as a PR move to bolster the company's image as it plans its initial public offering.

The partnership gives both companies a boost in public perception. Toyota in particular could use a boost after a recent safety scandal threatened its reputation as not only the greenest car company but also one of the safest. But green car fans should not begin speculating about specific Toyota-Tesla electric cars—as cool as some kind of Prius Roadster or Tesla Hybrid might be. Hartline told us that any details beyond the most basic agreement to share and collaborate on parts and production systems have not “been hammered out.” In terms of Toyota’s plans for a pure EV, it is still focused on a “limited range urban commuter car,” according to Hartline.

Tesla also announced that it will acquire the NUMMI plant, in Fremont, Calif., where Toyota and General Motors until recently produced as many as a half-million vehicles per year. But there were no details about how Tesla would utilize the facility beyond its hopes to produce 20,000 future electric models per year beginning in 2012. The plant was shuttered in March, idling 4,700 workers. Tesla could eventually hire thousands of workers to produce vehicles at NUMMI. "We're going to occupy a little corner [of NUMMI]," said Tesla CEO Elon Musk. "But there's a lot of room for growth, and long-term we intend to use the full capacity of NUMMI."

Gov. Arnold Schwarzenegger, who was in attendance at the partnership announcement, recognized the unique attributes of the two companies; the merger of the two can provide a glimmer of hope that the spirit of the companies could one day merge into a common vision of green car efficiency, chic and affordability. “The Prius is an extraordinary car that goes more than 50 miles per gallon. That was revolutionary,” Schwarzenegger said. “And we have Tesla. I talk about that sports car in a lot of environment speeches. You can do something that is very sexy looking, that goes from zero to sixty in less than 3.9 seconds and something that is attractive.”

“We love both of those forces, that build great cars, that now come together,” Schwarzenegger said. Beyond this symbolism, nothing much changes in terms of the vehicles each company will produce.