Author: Yash
When it comes to electric car startups, everyone is watching Tesla. The company has the market buzzing with its new models, production plans, and high-profile partnerships. Now another car giant is taking a page from that playbook. It seems like Toyota has learned from Tesla’s move. To compete with Tesla on its home turf of California and fend off rivals in China, Toyota announced earlier that it’d invest $1 billion in an electric car startup called Recargo. The company also promised to release its own EV by 2020.
Just like Tesla, Toyota has other goals in mind as well: The investment could lead to software integration between the two companies’ vehicles. With this announcement, Toyota joins a growing group of rivals that are investing in electric car startups while developing their own sustainable technologies simultaneously. While these moves are unlikely to rock the auto industry as Tesla alone did, they point to an exciting future for electric cars at all price points. Let’s see what Toyota has learned From Tesla’s move and what it is doing about it.
The quick answer is that it’s too early to tell. Industry analysts and experts are divided on Tesla’s strategy of forming partnerships with other carmakers. On the one hand, Tesla is giving rivals access to its technology and opening up the market for electric cars as a whole. That’s good for everyone in the long run, as it brings more customers into the market for sustainable vehicles. On the other hand, Tesla is developing a reputation for being controlling with its partners, which could lead to resentment and backfire on the company. Tesla’s Autopilot system, for example, is often compared to a “walled garden” because it is not compatible with other car software. If Tesla’s partners feel like they’re being forced to take a back seat, they could resent their partnership with the company.
Tesla’s most famous partnerships are with Toyota — which invested $50 million in 2010 — and Panasonic, which supplies batteries to Tesla and owns a small stake in the company. Another major partnership is with Mercedes, which is working with Tesla to build an electric version of the iconic Sprinter van. While these deals have helped Tesla scale up its supply chain and build out its network of charging stations, it’s also given the company a huge leg up on the competition. If Tesla’s partners integrate their technology into the car, they’ll have a head start in terms of consumer trust — especially in areas where Tesla has built strong brand awareness, like California. Toyota’s investment in Recargo, which is developing technology for autonomous EVs, could help both companies avoid getting bogged down in their own R&D efforts. Instead, Toyota and Tesla could focus on their core competencies — designing beautiful cars and selling them — while sharing underlying technology with each other.
For established automakers, the chance to partner with Tesla could be a double-edged sword. If a partner is able to successfully integrate Tesla’s technology into its cars, it could lead to positive word of mouth and more sales. On the other hand, if a partner fails to integrate Tesla’s tech, it could look bad and open up a new source of competition. As of now, it’s difficult to predict which brands will be hit hardest by Tesla’s partnerships. We don’t even know which carmakers will partner with Tesla in the first place. However, we can make some educated guesses based on the companies’ strengths and weaknesses. For example, Toyota has been a leader in hybrid cars but has lagged behind in EVs.
Tesla’s competitors are already feeling the heat, but the pressure is likely to fall hardest on German and Japanese automakers. EVs make up less than 1% of global car sales, meaning that even a large-scale investment from Tesla won’t have much of an impact. In countries that are heavily reliant on diesel-powered cars, like Germany, Tesla’s technology is simply too expensive for mass adoption. That’s why companies like Daimler, which owns Mercedes-Benz, are investing in their own EVs — and why German consumers have been slow to buy Tesla vehicles. Resulting partnerships with other automakers could help Tesla overcome those initial hurdles, thus boosting its bottom line.
It seems like Toyota has learned from Tesla’s move also. Toyota’s investment in Recargo might be a response to Tesla’s aggressive push into China. Earlier this year, Tesla partnered with the country’s biggest EV importer and got a $2 billion line of credit. Elon Musk hinted that Tesla would begin building cars in China as early as next year. That could pose a serious threat to Toyota, which has been one of the biggest carmakers in China since the 1990s. The company relies on China for nearly one-third of its global sales and is eager to expand its EV fleet. However, don’t expect Toyota to follow Tesla’s lead entirely. The company recently partnered with Subaru to launch an all-electric car based on Subaru’s existing platform. That move represents a compromise between the “walled garden” strategy and the benefits of a partnership.
When Tesla first started its “wall-garden” strategy, skeptics predicted that it would be a one-way street that would eventually lead to a closed marketplace. However, as more companies form partnerships with Tesla, we see the exact opposite. At this point, we don’t know exactly how many automakers plan to integrate Tesla’s technology. However, if even a few major players join the club, we could see a new wave of innovation in the car industry. If the “walled garden” approach is successful, it could eliminate the need for car-makers to release multiple versions of the same vehicle for different regions. That could save carmakers a lot of money and lead to more affordable electric cars as a whole. That’s an exciting prospect, but it’s too early to tell if or when it’ll happen.
While we can’t say for sure how the automotive landscape will be altered by these moves, we can make some educated guesses. First, expect to see a flood of more affordable EVs hitting the market over the next few years. Tesla’s high price tags put the company out of reach for many buyers, but the automakers that are investing in EVs can use their existing manufacturing footprint to produce affordable models. That means that dedicated Tesla owners could see their cars become more commonplace. One thing is certain: Tesla’s competitors are no longer content to sit on the sidelines while the company makes headlines. The pressure to transition to sustainable power sources is only growing stronger, and automakers are finally feeling the heat — and doing something about it.
Conclusion
Toyota has learned from Tesla’s playbook. This is because Tesla’s success has inspired other automakers to invest in EV startups. That could lead to a more open marketplace, with more affordable and innovative vehicles on the horizon. However, the rise of partnerships doesn’t mean that Tesla is going away any time soon. The company still has plenty of plans to keep it at the forefront of the industry. Whether or not Tesla’s approach will pay off, in the long run, remains to be seen. The company has had a mixed track record with its partners so far, and its aggressive growth strategy has come with a few hiccups. Nevertheless, the future of the car industry looks bright for electric cars as a whole. EVs are more affordable than ever before, and more people than ever are buying them.
Tesla is feeling the pressure as the Big Three automakers ramp up their efforts to catch up in the electric car race. As traditional automakers invest in electric car startups and draw on their own resources, we’re likely to see an influx of EVs. Yet this competition is a good thing for consumers: The more EVs that hit the road, the more infrastructure is built to support them and the more affordable they become. That said, Tesla will almost certainly remain the leader in the EV market as long as Elon Musk can keep his company focused on its core goals of creating high-quality, desirable vehicles. It looks like Toyota has learned from Tesla’s recent moves. It will be interesting to see how the brand proceeds from here.
