Although the deal to revive the NUMMI plant has raised hopes that it will result in thousands of greentech jobs, questions remain about how many people ultimately will be employed there and how long it might take for those jobs to materialize.
Tesla Chief Executive Elon Musk said the partnership between his Palo Alto company and Toyota, the Japanese auto giant, eventually could result in 10,000 new jobs, with half of those at the New United Motor Manufacturing Inc. facility in Fremont, which closed in April after General Motors and Toyota abandoned a 25-year partnership.
But other car companies are lining up to enter the electric-car market, some with vehicles expected to sell at less than half the price of the $50,000 Model S that Tesla intends to make at the plant. And while Tesla might attract more buyers by marketing a cheaper car under the Toyota name, the two companies so far have been vague about their plans. That raises questions among some analysts about how many cars the new venture can sell and how many workers it ultimately will need to build them.
"The price is the biggest barrier to the sort of high volumes that would justify the work force they are talking about," said Ed Kim, an automobile industry analyst at AutoPacific. He also was perplexed by Musk's stated plan to initially hire about 1,000 workers and produce 20,000 cars a year, because the 5,700 workers that NUMMI had at its peak made more than 400,000 cars a
"It doesn't quite add up," he said.
Tesla and Toyota officials have offered few details about their venture, explaining that because Tesla is seeking to go public, federal rules require them to be mostly quiet about their plans. About all they have said about the partnership is that Toyota will invest $50 million, Tesla will acquire the plant, production of the Model S will start in 2012 and they won't oppose the plant workers from being in a union.
However, on Friday, Tesla spokeswoman Khobi Brooklyn emphasized that it could be years before the venture gears up production to employ anywhere near the numbers of those who once worked at NUMMI. Brooklyn added that Tesla initially will use only a small portion of the 5.3 million-square-foot facility.
Indeed, by automaker standards, Tesla is a small player. Since its incorporation in 2003, it has sold just 1,200 of its speedy Roadsters, which go for a base price of $109,000. But analysts say the company has tapped into a market that is bound to get big — eventually.
A study in January by research firm IHS Global Insight predicted electric vehicles will account for nearly 20 percent of the global market for light vehicles in 2030. By that same year, electric vehicle sales in North America, Europe and Asia should reach $80 billion to $120 billion, according to a recent study by McKinsey & Co.
Many people today are nervous about driving an electric car, because the vehicles typically can't travel very far without needing to be recharged, and charging stations are hard to find.
But experts believe both limitations will be eased over time.
As a result, while fewer than 5,000 electric vehicles are sold each year now, sales are expected to hit 600,000 annually in North America alone by 2016, said Stephen Spivey, an automotive expert with market research firm Frost & Sullivan.
At some point, Tesla should have no problem selling 20,000 cars a year, Spivey added. But he was skeptical the company could sell the numbers produced by NUMMI under the GM-Toyota regime, unless the vehicles carried the Toyota brand. That's because surveys show consumers are leery of buying electric cars not made by well-known companies.
Tesla also could face tough competition. A number of other car companies — notably BMW, Audi, Daimler and Renault — are developing their own electric vehicles, in part because of government rules requiring cars to offer better gas mileage.
One of the biggest challenges is expected to come from Nissan, which is due to begin selling its four-door Leaf later this year at a price of about $20,000, after a federal tax credit and state rebate.
Cleantech industry analyst Dallas Kachan said it's unclear how far into the electric-car business Toyota plans to go with its new partner. But he said the Japanese giant's initial deal with tiny Tesla will be worth watching.
"It takes extremely deep pockets to make vehicles in meaningful quantities and even deeper pockets to get those products to sell," he said. And despite Toyota's relatively small initial investment of $50 million, he added, "every courtship begins with the first dance."
Contact Steve Johnson at 408-920-5043.
The promise: With Toyota's
$50 million investment, Tesla plans to hire about 1,000 workers to make as many as 20,000 electric cars per year at the NUMMI plant in Fremont, with production beginning in 2012. It envisions eventually employing about 5,000.
The limitations: Tesla would occupy only a tiny part of the plant initially and it might be years before it hires 5,000 people, leaving most of NUMMI's 4,700 laid-off workers with a long wait to be rehired. Competition from other electric-car makers could hinder Tesla's sales, limiting its expansion. Toyota's future involvement with the plant also remains vague.