Toyota and Tesla Motors to Build Electric Vehicles in California

TESLA MOTORS, INC. (Tesla) and TOYOTA MOTOR CORPORATION (TMC) announced that they intend to cooperate on the development of electric vehicles, parts, and production system and engineering support.

Electric Vehicle production is set to begin in 2012. About 1,000 workers will be hired for the venture. "We will be purchasing the NUMMI plant," said Elon Musk, Tesla’s chief executive officer.

Musk was joined by California Gov. Arnold Schwarzenegger and Toyota CEO Akio Toyoda at Tesla’s headquarters in Palo Alto. "What we are witnessing today is a historic example of California’s transition to a cleaner, greener and more prosperous future," the governor said.

Toyota will invest $50 million in Tesla. "We are very happy to see them come here," Fremont Mayor Bob Wasserman said when told of the decision to build electric vehicles in his city. "Electric cars are the cutting edge. We are very proud to have them here."

The decision is a reversal of fortune for Fremont, which only weeks ago lost 4,700 jobs when Toyota halted production of cars and trucks at New United Motor Manufacturing Inc. or NUMMI, the only vehicle plant in California.

The Model S is expected to be the first pure electric car premium sedan and is designed from the ground up to take full advantage of the electric vehicle architecture.

The sedan, which Tesla unveiled in March 2009, has an anticipated base price of $49,900, including a federal tax credit, and is intended to deliver the foremost design and technology in the automotive world. With an optional extended-range battery pack, the Model S will travel over 300 miles per charge.

For 25 years, until production ended April 1, the NUMMI factory was a joint venture between Toyota and General Motors Corp. Now Toyota will return to the factory, again as a joint-venture partner.

"This is a historic moment that has important benefits for the state, next week, next month, next year, and for decades from now," said University of California-Berkeley professor Harley Shaiken, a member of the university’s Institute for Research on Labor and Employment.

Much in the way that the Bay Area and the state have evolved into the home of high-tech, California could also become a hub for vehicles of the future.

"The Tesla-Toyota deal points to the possibility of California anchoring high-tech alternative vehicle production," Shaiken said.

The decision also raises the prospect that the Tesla-Toyota venture could produce a hiring boom for hundreds of former NUMMI employees.

"We’re thrilled that Tesla wants to come into NUMMI with Toyota as a partner," said Sergio Santos, president of the United Auto Workers local that represented about 3,700 NUMMI employees.

For some time, Tesla has scoured California for a site to build a Model S electric sedan, which is due to go on sale in 2012.

The sedan is due to go on sale in 2012 at a price of $49,900, including federal tax credits. It is designed to travel as far as 300 miles after being charged for three to five hours, and can be fully or partially recharged by solar or wind power..

Now, Tesla produces only its $109,000 Roadster. The two-seater electric vehicle with lithium ion batteries can travel 236 miles. The new plant could produce the $49,900 Model S and an electric car that would cost less than $30,000.

Even one shift producing one vehicle would need 600 to 1,200 workers, Shaiken estimated. But those numbers could expand over the years.

"If the first model succeeds, you immediately double those numbers with a second shift," Shaiken said. "Then with new models, you have all sorts of possibilities."

Until Thursday morning, the Southern California city of Downey was all but certain to land the electric vehicle factory. Downey and Tesla officials recently went over a lease agreement for the location.

But hours before the announcement at Tesla’s headquarters in Silicon Valley, Tesla’s CEO told Downey leaders that their city had been jilted.

"We feel stunned," Downey Councilman Mario Guerra said. "We were led to believe that Downey was it."

California Treasurer Bill Lockyer was described by insiders in the talks as a key figure in the negotiations that catapulted Fremont into the winning position for the factory. Before holding statewide office, Lockyer had represented state legislative districts that included Fremont.

"This deal provides a really exciting opportunity to reuse the plant, create employment, and build the cars of the future," said Lori Taylor, Fremont’s economic development director.

In sharp contrast to Downey’s disappointment, Fremont is poised to be a nexus for a new generation of technologies from solar to electric cars. And the potential of a new automaking venture in Fremont was deemed out of the question since Toyota announced in August it would close the factory.

"What looked impossible for several months is all of a sudden going to be reality," Shaiken said.