Tesla Motors Stock IPO is Off to a Good Start, Toyota Relationship Solidifies

In spite of less than hospitable market conditions, Tesla Motors (now trading as TSLA) is off to a highly charged start (pun intended) in their first day on the NASDAQ. Opening at $17/share, the stock closed at $23.89 just moments ago. It’s even more impressive considering that the Dow Jones dropped 3% today as investors worry about the recession making a comeback.

Obviously, there are plenty of people out there who believe the consumer demand for electric cars will eventually be big, and that Tesla will profit on that demand, even though they’ve operated with aggregate losses of $290 million so far. {International Business Times} There hasn’t been an IPO by a US automaker since Ford went public in 1956, and everyone remembers the dire straits of GM and Chrysler not long ago, so the success of the IPO is reason for optimism.

General Motors declared bankruptcy at the beginning of Summer 2009. One result of this declaration was the end of GM’s partnership with Toyota at New United Motors Manufacturing Inc. (NUMMI), an automotive manufacturing plant in Fremont, CA. The end of that relationship meant the plant was to be closed down due to Toyota’s inability to keep up the plant by themselves. After producing their last car at NUMMI, Toyota closed the plant on April 1, 2010. Many workers in the Greater San Francisco Bay area lost their jobs.

But good news was just around the corner for Toyota. On May 20, 2010, Tesla Motors purchased a share of the NUMMI plant, opening a new possible partnership for Toyota. The partnership would mark new opportunities for both companies.

Tesla’s move into the venture would mean a significant increase in operations for the small company. Incorporated in 2003, Tesla has produced just over 1000 cars in its 7 years and is one of the leaders of electric automotive technology. Currently, Tesla is only producing the Roadster and the Roadster Sport. Both cars are completely electric and can drive over 200 miles on a single charge. By purchasing a share in NUMMI, Tesla has acquired the means to produce a more market friendly electric vehicle, the Sedan S.

Meanwhile, Toyota would benefit from a partnership with Tesla. If the two enter into a partnership, the two companies will collaborate upon future electric vehicles.

The $42 million deal grabbed Tesla about 55 percent of NUMMI, yet neglected to secure manufacturing equipment. So while Tesla now has space to do manufacturing, it lacks the necessary machinery to do so. As part of the transaction, Toyota agreed to purchase to $50 million worth of Tesla stock, further cementing the relationship between the two companies. That was contingent upon Tesla’s Initial Public Offering materializing before the end of the year, and with it becoming reality, so to does the deal with Toyota.

Regardless of how the deal works out, Tesla is poised to begin production of the Sedan S at NUMMI in 2012. With 2,200 reservations for the Sedan S, Tesla plans to produce 20,000 vehicles its first year in production at NUMMI. The Sedan S will hopefully allow the company to grow and build a wider consumer base of those who cannot afford the $100,000+ Roadster. {bizjournals.com}