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Tesla: Is Major Support From Toyota Close At Hand?

Tesla Model S and Roadster - Premium Electric Vehicles
Tesla Model S: Image used with permission from Tesla

This is clearly not a conducive environment for clean energy stocks. It’s a time to keep your powder dry.

However, it may be worth holding some shares in Tesla (TSLA) on the potential for further news on the company’s strong relationship with Toyota (TM). Clean Energy Intel has no specific knowledge of the ongoing negotiations between the two companies. Nevertheless, the developing situation looks intriguing -

  • Tesla already has an original $60m deal with Toyota related to the supply of motors and batteries for Toyota’s first 100 RAV4 EV prototypes. 
  • Toyota also owns a 2.9% stake in Tesla.
  • In a July 15th filing Tesla announced that the company had agreed a further $100m three year deal with Toyota to supply the entire powertrain for the RAV4 EV – battery, motor, gear box and power electronics.
  • Then during Tesla’s Q2 earnings call on August 3rd, CEO Elon Musk suggested that Tesla and Toyota are currently negotiating a deal ‘that is an order of magnitude larger’ than the latest $100m RAV4 deal.
  • Finally, AutoObserver then reported a Tesla executive as having said that the ‘company was discussing an unspecified $1-billion deal with the world’s largest automaker’. If true that would clearly be significant.
The current environment is not one in which the market favors companies which are yet to make profits. Tesla’s Q2 earnings offered record revenues at $58m but a widening net loss of $58.9m, or 60 cents a share. However, a major deal with Toyota would significantly alter the outlook for 8 year old Tesla. Worth thinking about.
Disclosure: I am long Tesla