Is Tesla and Toyota Teaming Up?

Is Tesla and Toyota Teaming Up?

South Korean news reports claim that Toyota and Tesla are heading for an official partnership and it’s been in the pipeline since last year. The news comes from a credible paper and reporter who outlined the Toyota Tesla partnership would enable the US auto manufacturer to produce a low cost, all-electric compact SUV using the Toyota platform.

If Toyota provides Tesla with the vehicle platform to Tesla, then in exchange, Tesla provides some of its electronic control platform and software technology to Toyota. This could be a smart move for Tesla to increase sales in Asia and go up against the region’s carmakers that are producing EVs at a very affordable price. Up to now, Tesla has to been able to compete in the lower end price range.

Tesla’s Technoking, Elon Musk said at the company’s Battery Day in September 2020 that they are planning to release a $25,000 compact electric car by 2023. However, many auto experts say it would be extremely difficult for Tesla to produce a low cost vehicle at a profit, which is why it has taken so long for the US EV company to get to the point of announcing an affordable model.

The partnership would benefit Toyota by significantly reducing the resources, time, and cost on designing an integrated electronic control platform (ECU) and operating system (OS) that was developed by Tesla. Reports say that Toyota is evaluating Tesla’s technology and its ability to control and improve functions through wireless updates – a space that the Japanese car maker has been lagging in.

With the increased use of electronics in vehicles, the ECU is used in various parts of the car from the anti-lock braking system, four-wheel drive system, electronically controlled automatic transmission, active suspension system and airbag system to body safety, network, entertainment and sensing and control systems.

It seems like a smart move for both manufacturers as it would indicate a win-win where they are able to compensate for each other's weaknesses while focusing on their own strengths.

While this may seem surprising, it’s not the first time Toyota and Tesla have teamed up. Both car makers jointly agreed to develop EVs back in 2010. And in 2012, Toyota's RAV4 electric vehicle was marketed as being equipped with Tesla's battery system. However, for several reasons, the partnership ended 3 years later. Akio Toyoda and Musk have maintained their professional relationship, leaving the door open for future alliances.

Last year, Toyota sold 9.35 million vehicles and surpassed VW’s numbers. Toyota, Isuzu, and the truck subsidiary Hino have plans to fast-track the electric and autonomous driving of commercial vehicles. However, Toyota initially worked on establishing a hydrogen fuel cell development joint venture with five Chinese automobile and technology companies, including Tsinghua University, Cheil, Dongfeng, and Guangzhou Motors.

And from 2022, this jointly developed hydrogen fuel cell system will be installed on Chinese trucks and buses. Toyota is going all out to maximize economies of scale related to EVs and FSD capabilities by establishing successive capital alliances with rivals Mazda and Suzuki.

It is starting to make sense what motivated Musk to cause a stir on Twitter last week claiming that Tesla has a >0% of becoming the biggest company in the world. Perhaps the Technoking was alluding to this breakthrough in getting a smaller and cheaper EV to market sooner than later by partnering with Toyota.

The context isn’t clear as to what motivated Musk to publish that now deleted tweet, but if current reports coming out of Asia prove to be true, then it would kickstart Tesla’s run into the mass market vehicle.