Under the $100 million Toyota deal, Tesla will supply battery packs and engines for an all-electric Rav 4 slated to go into production next year. This is on top of the $50 million Toyota agreed to pay for development of the components. Tesla also has an existing agreement to supply battery backs and chargers for Daimler's electric smart car.
I like these deals because I don't think Tesla can survive as an auto manufacturer. Sure, I understand why it had to build the Roadster. Someone needed to establish that EVs can be more than glorified golf carts. But now that Tesla's proved it possible, its major-league rivals have started to put serious money of their own into EVs.
Spurred on by the success of the Volt, General Motors
There's also a question of demand. According to a recent Gallup survey, 57% of consumers say they won't buy an electric car, regardless of the price of gas. If this number never changes, the major players won't feel that sting as painfully as Tesla will. For the major automakers, EVs act almost as an alternative fuel side bet, along with natural gas, hydrogen, bio diesel, and more efficient gasoline engines. If one technology flops, or fails to escape niche market status, it won't hurt them much. Tesla, on the other hand, will find itself fighting for sales in a crowded and relatively small market.
I would like to see Tesla adopt a strategy similar to that of Westport Innovations
Tesla has already started down this path with its existing partnerships, but it could go further. Ideally, it would move away from manufacturing vehicles -- though I suppose having a halo car to boost the brand name wouldn't hurt -- and focus on building strategic partnerships with automakers. This should allow Tesla to grow, without taking on the expenses and risks inherent in building a successful car brand.
Do you agree, or have I written off Tesla's prospects as an automaker too soon? Let us know what you think in the comments below.
Fool contributor Patrick Martin does not own shares of any of the companies mentioned here. You can follow him on twitter @TMFpcmart03. The Motley Fool owns shares of Ford Motor. Motley Fool newsletter services have recommended buying shares of Ford Motor, General Motors, and Westport Innovations. Try any of our Foolish newsletter services free for 30 days. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy.