Toyota to buy $50M stake in Calif. e-car maker Tesla

Toyota Motor Corp., the world's largest automaker, is acquiring a $50 million stake in Tesla Motors Inc. and will develop electric vehicles with the California company.

Tesla will buy a closed Toyota joint-venture factory in California to build its Model S and other cars, Governor Arnold Schwarzenegger said in a statement today. The companies will cooperate on developing electric vehicles, parts and production systems and engineering support.

The deal brings together Toyota, the world's biggest seller of hybrid autos, and Tesla, the only company now selling U.S. highway-legal battery-powered cars, as U.S. and California emission rules push carmakers to offer less-polluting vehicles. Toyota's investment comes as Palo Alto, California-based Tesla, which sells the $109,000 Roadster electric sports car, prepares to raise about $100 million in an initial share sale.

"I've felt an infinite possibility about Tesla's technology," said Akio Toyoda, chief executive of the Japanese automaker, founded by his grandfather. "By partnering with Tesla, my hope is that all Toyota employees will recall that ‘venture business' spirit."

Share Sale

Tesla, which hasn't posted a profit in six years, said it may use proceeds from its share sale to pay for factories and equipment, which it has estimated will cost as much as $125 million this year, and for acquisitions. The company said it doesn't have agreements or commitments for specific purchases.

The company will revive the New United Motor Manufacturing Inc. plant, known as NUMMI, for 25 years a joint venture between Toyota and the former General Motors Corp. that closed in April. The deal will create 1,000 jobs, Schwarzenegger said.

Electric cars have been supported by U.S. policy makers including President Barack Obama as a way to reduce the nation's oil use and dependence on foreign energy sources.